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TABLE OF CONTENTS
INDEX TO THE FINANCIAL STATEMENTS
As confidentially submitted to the Securities and Exchange Commission on June 7, 2017
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Molino Cañuelas S.A.C.I.F.I.A.
(Exact name of Registrant as specified in its charter)
Cañuelas Mill S.A.C.I.F.I.A
(Translation of Registrant's name into English)
Republic of Argentina (State or other jurisdiction of incorporation or organization) |
2040 (Primary Standard Industrial Classification Code Number) |
Not applicable (I.R.S. Employer Identification Number) |
John F. Kennedy 160, B1814BKD
Cañuelas, Province of Buenos Aires
Republic of Argentina
+54 (22) 2643-2885
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Tel: +1 (302) 738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to: | ||
Marcelo A. Mottesi, Esq. Milbank, Tweed, Hadley & McCloy LLP 28 Liberty Street New York, New York 10005 (212) 530-5000 |
Juan Francisco Mendez, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 (212) 455-2000 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, which we refer to as the Securities Act, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is an emerging growth company pursuant to the Jumpstart Our Business Startups Act of 2012. o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Proposed Maximum Aggregate Offering Price(1)(2)(3) |
Amount of Registration Fee |
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---|---|---|---|---|
Class B ordinary shares, AR$0.10 par value per share(4) |
US$ | |||
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 2017
Molino Cañuelas S.A.C.I.F.I.A.
Class B Ordinary Shares
(Including Class B Ordinary Shares represented by American Depositary Shares)
This is an initial public offering of the Class B ordinary shares of Molino Cañuelas S.A.C.I.F.I.A., a Sociedad Anónima Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria organized under the laws of Argentina. We and the selling shareholders named in this prospectus are offering Class B ordinary shares in a Global Offering (as defined below). Of the Class B ordinary shares being offered, we are selling Class B ordinary shares, which we refer to as the new Class B ordinary shares, and the selling shareholders are selling Class B ordinary shares, which we refer to as the selling shareholders Class B ordinary shares and, together with the new Class B ordinary shares, the Class B ordinary shares. We will not receive any proceeds from the sale of Class B ordinary shares by the selling shareholders.
American Depositary Shares, or ADSs, representing Class B ordinary shares will be offered in the United States of America and other countries outside of Argentina through the international underwriters named in this prospectus, which we refer to as the international offering. Each ADS represents Class B ordinary shares. We and the selling shareholders are concurrently offering Class B ordinary shares in Argentina through the Argentine placement agent under a Spanish-language offering document, which we refer to as the Argentine offering. We refer to the international offering and the Argentine offering together as the Global Offering. The total number of Class B ordinary shares in the international offering and the Argentine offering is subject to reallocation between these offerings. The closing of the international offering and the Argentine offering will be conditioned upon one another.
We expect that the offering price for the international offering will be between US$ and US$ per ADS (equivalent to AR$ and AR$ per Class B ordinary share, based on the venta de divisas exchange rate of AR$ : US$1.00 reported by the Banco de la Nación Argentina on , 2017).
Prior to the Global Offering, there has been no public market for our Class B ordinary shares or the ADSs. We intend to apply to list the ADSs on the New York Stock Exchange, which we refer to as the NYSE, under the symbol "MOLC". Further, we intend to apply to list and trade our Class B ordinary shares in Argentina on the Bolsas y Mercados Argentinós S.A., or BYMA under the symbol " ".
We have granted to the international underwriters the right for a period of 30 days to purchase a maximum of additional ADSs, representing Class B ordinary shares, at the public offering price paid by investors, less underwriting discounts and commissions, to cover over-allotments, if any.
Investing in our Class B ordinary shares and the ADSs involves risks. See "Risk Factors" beginning on page 31.
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Per Class B Ordinary Share(1) |
Per ADS(1) |
Total |
|||
---|---|---|---|---|---|---|
Public offering price |
US$ | US$ | US$ | |||
Underwriting discounts and commissions(2) |
US$ | US$ | US$ | |||
Proceeds, before expenses, to Molino Cañuelas S.A.C.I.F.I.A. |
US$ | US$ | US$ | |||
Proceeds, before expenses, to the selling shareholders |
US$ | US$ | US$ | |||
|
Delivery of the ADSs is expected to be made on or about , 2017, or the Delivery Date, through the book-entry facilities of The Depository Trust Company.
The public offering of our Class B ordinary shares in Argentina will be registered with the Argentine Securities Commission (Comisión Nacional de Valores), which we refer to as the CNV. Neither the U.S. Securities and Exchange Commission, which we refer to as the SEC, nor any U.S. state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Joint Global Coordinators | ||
J.P. Morgan | UBS Investment Bank | |
Joint Bookrunners | ||
HSBC | Itaú BBA |
The date of this prospectus is , 2017.
You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. The information in this document may only be accurate on the date of this document.
The distribution of this prospectus and the Global Offering and sale of the Class B ordinary shares and the ADSs in certain jurisdictions may be restricted by law. We, the selling shareholders and the international underwriters require persons into whose possession this prospectus comes to inform themselves about and to observe any such restrictions. This prospectus does not constitute an offer of, or an invitation to purchase, any of the Class B ordinary shares or ADSs in any jurisdiction in which such offer or invitation would be unlawful.
This international offering is being made in the United States and elsewhere outside of Argentina solely on the basis of the information contained in this prospectus. The concurrent Argentine offering of our Class B ordinary shares is being made in Argentina by a prospectus in Spanish that has been filed with the CNV. The prospectus for the Argentine offering, although in a different format in accordance with CNV regulations, contains substantially the same information as contained in this prospectus.
i
The Argentine offering of our Class B ordinary shares was approved by the CNV on by Resolution No. . The authorization by the CNV means only that the information requirements have been satisfied. The CNV has not rendered an opinion with respect to the accuracy of the information contained in this prospectus. The accuracy of any accounting, financial and economic information as well as any other information provided in this prospectus is the sole responsibility of our Board of Directors and our statutory audit committee. Our Board of Directors hereby expresses as a sworn statement that this prospectus contains, as of the date of publication hereof, accurate and sufficient information concerning any significant events that may affect our financial and economic condition and any other information that must be made known to investors under applicable law.
This prospectus has been prepared on the basis that all offers of Class B ordinary shares and ADSs will be made pursuant to an exemption under the Prospectus Directive (Directive 2003/71/EC, as amended), as implemented in member states of the European Economic Area, or EEA, from the requirement to produce a prospectus for offers of the Class B ordinary shares and ADSs. Accordingly any person making or intending to make any offer within the EEA of Class B ordinary shares and ADSs which are the subject of the Global Offering contemplated in this prospectus should only do so in circumstances in which no obligation arises for the sellers of the Class B ordinary shares and ADSs or any of the international underwriters to produce a prospectus for such offer. Neither the sellers of the Class B ordinary shares and ADSs nor the international underwriters have authorized, nor do they authorize, the making of any offer of Class B ordinary shares and ADSs through any financial intermediary, other than offers made by the underwriters which constitute the Global Offering of Class B ordinary shares and ADSs contemplated in this prospectus.
ii
This prospectus contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements can be identified by words or phrases such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "is/are likely to," "may," "plan," "should," "would," or other similar expressions. The forward-looking statements included in this prospectus relate to, among others:
Many important factors, in addition to those discussed elsewhere in this prospectus, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including among other things:
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These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may turn out to be incorrect. Our actual results could be materially and adversely different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and other sections in this prospectus, which you should carefully review.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Unless requested by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form F-1 with the SEC regarding the international offering. This prospectus, which is part of the registration statement, does not contain all the information included in the registration statement, and you should refer to the registration statement and its exhibits to read that information. Reference in this prospectus to any of our contracts or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document.
Upon completion of the international offering, we will become subject to the informational reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Accordingly, under the Exchange Act, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and current reports on Form 6-K. You can read our SEC filings, including the registration statement, over the internet at the SEC's website at www.sec.gov. You may also read and copy any document we file with the SEC at the public reference facilities maintained by the SEC at the following location:
Public
Reference Room
450 Fifth Street
Room 1024
N.W., Washington, DC 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 10234, N.W., Washington, D.C. 20549, at prescribed rates. You may also request a copy of those filings, at no cost, by writing to Natalia Ruhl at our office at John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina or calling +54 (22) 2643-2885.
As a foreign private issuer, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. However, we intend to furnish our shareholders with annual reports containing financial statements audited by our independent registered public accounting firm and to make available to our shareholders quarterly reports containing unaudited financial data for the first three quarters of each year. We plan to furnish quarterly financial statements with the SEC to our shareholders promptly after filing such quarterly financial statements with the CNV, which requires such reports to be filed within 42 days after the end of each of the first three quarters of our fiscal year, and we will file annual reports on Form 20-F within the time period required by the SEC, which will be four months from November 30th, the end of our fiscal year.
We will send the ADS Depositary a copy of all notices that we give relating to meetings of our shareholders, distributions to shareholders, offering of rights and a copy of any other report or communication that we make generally available to our shareholders. The ADS Depositary will make the notices, reports and communications that it receives from us available for inspection by registered holders of ADSs at its office. The ADS Depositary will mail copies of those notices, reports and communications to you if we ask the ADS Depositary to do so.
We will also file annual and quarterly reports and current reports (hechos relevantes) with the CNV and the BYMA in Argentina as required by applicable law or regulations.
v
PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
Presentation of Financial Information
This prospectus contains our audited consolidated combined financial statements as of December 1, 2013, and November 30, 2014, 2015 and 2016, and for our fiscal years ended November 30, 2014, 2015 and 2016, which we refer to collectively as our audited consolidated combined financial statements.
We prepare our audited consolidated combined financial statements in thousands of Pesos in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We have applied all IFRS issued by the IASB effective at the time of preparing our audited consolidated combined financial statements. We applied IFRS for the first time for our fiscal year ended November 30, 2016. Our opening IFRS statement of financial position was prepared as of our transition date to IFRS, which occurred on of December 1, 2013.
Our audited consolidated combined financial statements have been audited by Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina, which we refer to as PwC, a member firm of the PricewaterhouseCoopers global network, an independent registered public accounting firm, whose report dated March 27, 2017 is also included in this prospectus. The office of Price Waterhouse & Co. S.R.L. is located in Bouchard 557, 8th floor, C1106ABG, Buenos Aires, Argentina.
Our Reorganization
During the fiscal year ended November 30, 2016, and subsequent to the end of the fiscal year but prior to the effectiveness of the Global Offering, our principal shareholders (as defined below) elected to complete a reorganization of Molino Cañuelas S.A.C.I.F.I.A. and various other entities and businesses under the common control of our principal shareholders in order to organize all of our business activities under Molino Cañuelas S.A.C.I.F.I.A. We effected this reorganization through a series of acquisitions and related corporate transactions. We refer to this series of transactions as the Reorganization. In this prospectus, each of the terms Molino Cañuelas, we, us, our, and our Company means Molino Cañuelas S.A.C.I.F.I.A. and its subsidiaries after the Reorganization, unless otherwise indicated. For more information on the Reorganization see, "BusinessOur Corporate Structure and the Reorganization".
The Reorganization was effected between entities which were under the common control and common management of our principal shareholders for all periods for which financial statements are presented. Our consolidated combined financial statements are presented in accordance with IFRS as issued by IASB on a combined basis after giving effect to the Reorganization. IFRS provides no guidelines for the preparation of consolidated combined financial statements, which are therefore subject to the rules given in International Accounting Standards (IAS) 8.12. These rules require consideration of the most recent pronouncements of other standard-setting bodies, other financial reporting requirements and recognized industry practices. As such, as described in Note 1.3 to our audited consolidated combined financial statements, we applied the "predecessor accounting approach" in accordance with the rules on accounting for business combinations under common control in consolidated combined financial statements to the entities under the common control of our principal shareholders that were the subject of the Reorganization. This means that the assets and liabilities of the entities and businesses acquired as part of the Reorganization included in our audited consolidated combined financial statements correspond to the historical amounts in the individual financial statements of combined entities (i.e., predecessor values). Accordingly, any consideration given or received in relation to the transactions forming part of the Reorganization is recognized directly in equity as withdrawals or contributions at the time of the transfer.
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As certain transactions forming part of the Reorganization had not occurred as of the fiscal year ended November 30, 2016, our consolidated combined statement of financial position as of the fiscal year ended November 30, 2016 does not reflect all of the consideration paid in connection with the Reorganization. Further, assets and liabilities and the historic impact on profit and loss of each entity or business acquired as part of the Reorganization (i.e., Molino Cañuelas S.A., Molinos Florencia S.A., Molino Americano S.A. (Argentina), Molinos Puntanos S.A., Megaseed S.A, Compañia Argentina de Granos S.A. and Cañuelas Pack S.A.) were reflected in our audited consolidated combined financial statements even though the acquisition of certain entities or businesses did not occur until after our fiscal year ended November 30, 2016.
Cargill Acquisition
On August 31, 2016, we completed the acquisition of certain assets including seven mills in Argentina, which we refer to as the Trigalia mills or Trigalia, from Cargill S.A.C.I., or Cargill, which we refer to as the Cargill Acquisition, for total cash consideration of AR$736 million. We analyzed the significance of the Cargill Acquisition pursuant to Rule 3-05 of Regulation S-X under the Securities Act, or Rule 3-05, and determined that we need not include separate financial statements or pro forma financial information for the business acquired in connection with the Cargill Acquisition. For a variety of reasons, however, we were unable to obtain (and include in our analysis) complete financial statements for the acquired business that would enable us to conduct a full significance analysis under Rule 3-05. As a result, we sought and obtained a waiver from the SEC pursuant to Rule 3-13 under Regulation S-X. For further information on the Cargill Acquisition, see "Prospectus SummaryCargill Acquisition".
Adjusted Segment EBITDA
Adjusted Segment EBITDA refers to a segment's share of our line item results from operations before financing and taxation before depreciation and amortization. Adjusted Segment EBITDA excludes certain items that are not considered part of our Company's core operating results. Specifically, finance income, finance cost and exchange differences are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of our Company.
Although Adjusted Segment EBITDA is commonly viewed as a non-IFRS measure in other contexts, pursuant to IFRS 8, Adjusted Segment EBITDA is treated as an IFRS measure in the manner in which we utilize this measure. We use Adjusted Segment EBITDA for purposes of making decisions about allocating resources to our segments and to internally evaluate their financial performance because we believe it reflects current core operating performance and provides an indicator of the segment's ability to generate cash.
Non-IFRS Information
Total Adjusted Segment EBITDA
Total Adjusted Segment EBITDA is a non-IFRS financial measure defined as earnings (profit or loss for the year) before interest expense, exchange differences, taxes, depreciation and amortization and gains on acquisition of businesses.
Total Adjusted Segment EBITDA is not defined under IFRS and has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS. For example, Total Adjusted Segment EBITDA:
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Our management believes Total Adjusted Segment EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from profit for the year in arriving at Total Adjusted Segment EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
Total Adjusted Segment EBITDA should not be considered as an alternative to, or more meaningful than, profit for the year from operating activities as determined in accordance with IFRS or as an indicator of our operating performance.
Total Adjusted Segment EBITDA may not be the same as similarly titled measures used by other companies.
We have included the calculations of Total Adjusted Segment EBITDA to the nearest corresponding IFRS measure for all the periods presented. For a reconciliation of Total Adjusted Segment EBITDA, see "Summary Consolidated Combined Financial DataNon-IFRS InformationTotal Adjusted Segment EBITDA".
Net Debt to Total Adjusted Segment EBITDA
We define Net Debt as total borrowings less cash and cash equivalents. We believe that the presentation of Net Debt and the ratio of Net Debt to Total Adjusted Segment EBITDA, both of which are non-IFRS financial measures, provide useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage. We use the ratio of Net Debt to Total Adjusted Segment EBITDA as one of our principal measures of capital management.
Net Debt and Net Debt to Total Adjusted Segment EBITDA should not be considered as an alternative to, or more meaningful than, borrowings as determined in accordance with IFRS.
Net Debt and Net Debt to Total Adjusted Segment EBITDA may not be the same as similarly titled measures used by other companies.
For a reconciliation of Net Debt to the nearest corresponding IFRS measure, see "Summary Consolidated Combined Financial DataNon-IFRS MeasurementNet Debt to Total Adjusted Segment EBITDA".
We believe that the foregoing non-IFRS financial measures, when considered together with our IFRS financial results and IFRS measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. We present those non-IFRS measures in order to provide supplemental information that we consider relevant for the readers of our audited consolidated combined financial statements included in this prospectus, and such information is not meant to replace or supersede any IFRS measures.
viii
Inflation
We have determined that currently the Peso does not qualify as a currency in a hyperinflationary economy according to the guidelines in IAS 29 Financial Reporting in Hyperinflationary Economies whereby financial information recorded in a hyperinflationary currency is adjusted by applying a general price index and expressed in the measuring unit (the hyperinflationary currency) current at the end of the reporting period. Therefore, the financial information included herein were not restated into constant currency. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsTrends and Factors Affecting Our Results of OperationInflation". Notwithstanding the above, in recent years, certain macroeconomic variables affecting our business, such as the cost of labor, the exchange rate of the Peso to U.S. Dollars and costs of sales associated with inputs necessary to run our business that are denominated in Pesos, have experienced significant annual changes, which, although they may not surpass the levels established in IAS 29, are significant and should be considered in the assessment and interpretation of our financial performance reported in this prospectus. See "Risk FactorsRisks Related to ArgentinaContinuing inflation may have an adverse effect on the Argentine economy, and, as a consequence, on our business, results of operation and financial condition". Argentine inflation could therefore affect the comparability of the different periods presented herein.
Market Data and Other Information
Market data used throughout this prospectus were derived primarily from reports prepared by The Nielsen Company South America, which we refer to as Nielsen, and CCR S.A., which we refer to as CCR. Data attributed to Nielsen or CCR is extracted from reports by Nielsen and CCR which are periodically reviewed by management. These reports are prepared on the basis of estimates and generally accepted statistical procedures on information that is not always within the control of Nielsen and CCR. Further, some of these practices and procedures are subject to estimation and margin of error inherent in statistical analysis. In addition, these studies only cover certain distribution channels, and, as such, may not reflect the totality of the market. The reports referenced in this prospectus include the NRI report on flour from November 2016, or the 2016 Nielsen Flour Report, the NRI report on ready-mixed products from November 2016, or the 2016 Nielsen Ready-Mixed Products Report, the NRI report on bread crumbs from November 2016, or the 2016 Nielsen Bread Crumb Report, the NRI report on pasta from November 2016, or the 2016 Nielsen Pasta Report, and together with the 2016 Nielsen Bread Crumb Report, the 2016 Nielsen Ready-Mixed Products Report and the 2016 Nielsen Flour Report, the 2016 Nielsen Reports. They also include the CCR audit report for vegetable oil from November 2016, or the 2016 CCR Vegetable Oil Report, and the CCR audit report for biscuits from November 2016, or the CCR 2016 Biscuit Report, and, together with the 2016 CCR Vegetable Oil Report, the 2016 CCR Reports.
In addition, certain statistical and factual information in this prospectus was derived from government reports and publications. Other information presented in the sections entitled "Industry" and "Summary" was derived from certain industry publications such as Euromonitor International, which we refer to as Euromonitor, or other public sources such as the United States Department of Agriculture's November 9, 2016 report on World Agricultural Supply and Demand Estimates, which we refer to as the 2016 USDA Report. Other information was derived from the Global Delivery and Takeaway Food Market 2016-2020 report, the Global Frozen Ready Meals Market 2016-2020 report, and Global Quick Service Restaurants Markets 2016-2020 report, each as provided by Technavio, hereafter the Technavio Reports. All data derived from Euromonitor in this document is based upon the report titled Passport Package Food 2017 Edition. All sales metrics therein refer to sales values at retail value and all volume metrics refer to retail sales volume. In all data attributed to Euromonitor, packaged food includes the Euromonitor categories of bread, pasta, pastries, sweet biscuits and savory
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biscuits. In addition, all references to biscuits, cookies and crackers in the Euromonitor data provided includes the Euromonitor categories of savory biscuits and sweet biscuits.
Such reports generally state that the information contained therein has been obtained from sources believed by such sources to be reliable. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, neither we, the selling shareholders, the international underwriters, nor any of our or their respective affiliates has independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications.
On January 8, 2016, Decree No. 55/2016 was issued by the federal government declaring a state of administrative emergency on the national statistical system and on the Instituto Nacional de Estadística y Censos, which we refer to as the National Statistics and Census Institute, or INDEC, until December 31, 2016. INDEC ceased publishing statistical data until a rearrangement of its technical and administrative structure was finalized. After the process of reorganization, on June 16, 2016, INDEC began releasing official measurements of its primary indication of inflation, the Consumer Price Index (Índice de Precios al Consumidor), or CPI, which is the general index of prices for the city of Buenos Aires and surrounding areas. INDEC reported that the monthly CPI increase in 2016 was 4.2% in May, 3.1% in June, 2.0% in July, 0.2% in August, 1.1% in September, 2.4% in October, 1.6% in November, and 1.2% in December. Further, the monthly CPI increases in 2017 were 1.3% in January, 2.5% in February, 2.4% in March, and 2.6% in April. INDEC has also published inflation figures for the Domestic Wholesale Price Index (Indice de Precios Internos al por Mayor, or IPIM) for 2016, reporting monthly increases of 9.0% in January, 5.0% in February, 2.4% in March, 1.5% in April, 3.6% in May, 2.9% in June, 2.7% in July, 0.4% in August, 0.4% in September, 0.6% in October, 1.1% in November and 0.8% in December, respectively, and increases in 2017 of 1.5% in January, 1.7% in February, 0.9% in March, and 0.5% in April. The IPIM for the year ended December 31, 2016 showed an annual increase of 34.5%. In addition, on June 29, 2016, INDEC published revised gross domestic product, or GDP, data for 2004 through 2015 based on constant 2004 prices. For more information on the inflation statistics see, "Risk FactorsRisks Related to ArgentinaContinuing inflation may have an adverse effect on the Argentine economy, and, as a consequence, on our business, results of operation and financial condition".
General
In this prospectus, when we refer to:
Solely for the convenience of the reader, we have translated certain Peso amounts into U.S. Dollars at the venta de divisas exchange rate reported by the Banco de la Nación Argentina for November 30, 2016, which was AR$15.87 to US$1.00. We make no representation that the Peso or U.S. Dollar amounts actually represent or could have been or could be converted into U.S. Dollars at the rates indicated, at any particular rate or at all. For a further description of the exchange rate of the Peso to the U.S. Dollar, see "Exchange Rates and Exchange Controls".
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References to fiscal years 2014, 2015 and 2016 are to our fiscal years ended November 30, 2014, 2015 and 2016, respectively.
Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Measurement Data
In this prospectus, where we refer to:
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This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our Class B ordinary shares or ADSs. Before investing in our Class B ordinary shares or ADSs, you should read carefully this entire prospectus for a more complete understanding of our business and the Global Offering, including the sections entitled "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated combined financial statements included elsewhere in this prospectus.
Company Overview
We are a leading food company with top-of-mind consumer brands such as Cañuelas ( ), Pureza ( ), 9 de Oro ( ), San Agustín ( ), Mamá Cocina ( ), Paseo ( ) and Florencia ( ), in the vegetable oil, flour, biscuits, cookies and crackers, ready-mixed and bread crumb product categories where, according to the Nielsen Reports and CCR Reports, we currently enjoy market shares of 26.0% (vegetable oil), 41.7% (flour), 34.1% (biscuits sub-category), 27.0% (ready-mixed products) and 25.5% (bread crumbs), respectively. Our full line of consumer products in our Retail Products segment and Branded Industrial Products segment includes over 600 products and approximately 700 stock keeping units, or SKUs, across seven different product categories.
We benefit from top-of-mind referential brands, sophisticated food development capabilities and a well-established distribution network. Our operations are supported by strategically located, modern, innovative and efficient production facilities, as well as an extensive sourcing network of farmers located throughout Argentina, one of the world's most productive agricultural areas.
We operate with the goal of adding value to agricultural products in which Argentina, our primary market and location of our principal sourcing activities, has natural competitive advantages. We achieve this through a history of continued expansion following a strategy of vertical integration. We benefit from having the largest milling capacity in Argentina, according to data from the Argentine Ministry of Agriculture, Livestock and Fishery, Ministerio de Agricultura, Ganadería y Pesca, which we refer to as MAGyP, with an installed milling capacity of 3.13 million tonnes and, according to the Argentine Milling Industry Federation (or FAIM, for the Spanish language acronym for Federación Argentina de la Industria Molinera), we are the largest producer of wheat flour in Argentina, processing over 28.5% of the wheat in Argentina in 2016 and, according to Euromonitor, we are the largest exporter of flour in Argentina, exporting 57.9% of the total wheat flour exported from Argentina in 2016. We market and sell our wheat flour under our Cañuelas, Pureza and Florencia brands in our Retail Products segment and under our Cañuelas, Multi-Harina, Pigue and Adelia Maria brands in our Branded Industrial Products segment.
Our operations include 21 production facilities located in Argentina, Uruguay and Brazil. We seek to market and sell our value-added retail food products across the region and take advantage of local opportunities in Uruguay, Brazil, Bolivia and Chile to expand our retail and industrial operations while relying on our competitive advantage in sourcing primarily agricultural products from Argentina.
We source our agricultural products primarily from a network of more than 8,000 farmers, to whom we sell a variety of goods and services to support their production activities primarily in exchange for their agricultural products. Our sourcing activities are conducted through 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers, covering a substantial portion of Argentina's productive agricultural areas, providing us access to large quantities of high quality agricultural products.
For the fiscal years ended November 30, 2014, 2015 and 2016, we generated AR$19,821 million, AR$22,134 million and AR$32,318 million (US$2,036 million) in total net sales, respectively. Our profit for the year for the fiscal years ended November 30, 2014, 2015 and 2016 was AR$148 million, AR$12 million and AR$864 million (US$54 million), respectively. For the same periods, our Total Adjusted Segment EBITDA was AR$889 million, AR$1,093 million and AR$2,277 million (US$143 million), respectively.
We organize our business in three segments: Retail Products, Branded Industrial Products and Agro-Services and Sustainable Sourcing. Together, the operations of these segments span the three main stages of our vertically integrated business model. We call our vertically integrated business model "From Farm to Fork" and consider it a key competitive advantage of our business as it allows us to enjoy a scale that drives efficiencies in food production and the distribution of our retail and branded industrial products and provides us with access to high quality agricultural products for our manufacturing process and stable gross margins of our various products across our three business segments. The charts below highlight the percentage of margin before operating expenses and the percentage of Total Adjusted Segment EBITDA generated by each of our business segments for the fiscal year ended November 30, 2016.
Percentage of Total Margin Before Operating Expenses by Segment2016 |
Percentage of Total Adjusted Segment EBITDA by Segment2016 |
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Total Margin Before Operating Expenses for the fiscal year ended November 30, 2016 was AR$7,236 million (US$456 million). |
Total Adjusted Segment EBITDA for the fiscal year ended November 30, 2016 was AR$2,277 million (US$143 million); Total profit for the fiscal year ended November 30, 2016 was AR$864 million (US$54 million). |
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Through our Retail Products segment, we offer more than 200 products from our recognized brands across a variety of categories, including flour, vegetable oil, biscuits, cookies and crackers, ready-mixed flour, bread crumbs, frozen foods and pasta. We market these products under, among others, the following recognized brands in Argentina: 9 de Oro, Pureza, Cañuelas, Mamá Cocina, Multiple, Florencia, San Agustín, Cukis and Paseo, among others, and also under our more recently launched brands such as Pizza Pietro and Horno Casero. We manufacture our retail products in our own production facilities, including our recently completed facility with advanced production technology in Carlos Spegazzini, Argentina, which we refer to as our Spegazzini facility. We sell our retail products to consumers in Argentina and the region through a variety of distribution channels, including large supermarkets (such as Walmart, Carrefour and Cencosud), wholesalers and other third-party distributors, supplemented by smaller points of sale, including gas stations (such as those owned by Shell and YPF) and convenience stores and fast food restaurants (such as McDonald's and Subway). We also produce white label versions of several of our retail products, including flour and vegetable oil, which we sell to key customers as a strategy to deepen our distribution relationships and as an important source of production volume. Our distribution network is organized around the geographical position of our production facilities. We are also developing ready to consume food products which we sell directly to consumers through our Puntos Caliente bakeries and our Pizza Alla Pala restaurant. For the fiscal year ended November 30, 2016, our Retail Products segment generated AR$3,718 million (US$234 million) in net sales or 12% of our net sales to third parties and AR$569 million (US$36 million) of Adjusted Segment EBITDA or 25% of our Total Adjusted Segment EBITDA.
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Historical Product Launches
Retail Product Market Opportunities
New trends in consumption, the expanding role of women in modern life and the trend toward healthier eating habits, are among the challenges that we face as a company. We believe that our market and consumer understanding will give us the opportunity to fulfill the needs of consumers with our extensive portfolio. We seek to develop products that become solutions for, and partners in the kitchen with, today's women. We believe we offer the modern woman numerous solutions to feeding her family, combining homemade qualities, nutritious options, practicability and healthfulness, while also allowing home cooks to add their own personal touches. We recognize that these home cooks are not only moms, but also wives, co-workers and friends, who enjoy nourishing their family and enjoy
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free time for themselves, as well. It is for these women that we target many of our branded retail food products.
Regional(1) Packaged Food Sales ('000 Tonnes) | Argentina Packaged Food Sales ('000 Tonnes) | |
Source: Euromonitor, IMF and INDEC | Source: Euromonitor, IMF and INDEC |
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Regional(1) Convenience Food Sales (mm kg) | Argentina Convenience Food Sales (mm kg) | |
Source: Euromonitor, IMF and INDEC | Source: Canadean |
For further information on the CAGR amounts presented above, please see "IndustryIndustry OverviewPackaged Food Industry" and "Prepared Meals Market Trends".
The main focus of our Branded Industrial Products segment is to supply inputs to our Retail Products segment, as well as to third-party branded industrial product customers. We sell flour, ready-mixed flour and additives through our Cañuelas, Florencia, Multi-Harina, Adelia María, Favorita, Leticia, Terminada, Rosafe, San Agustín and Pigüé brands. We manufacture our branded industrial products in our 21 production facilities in the region as well as two third-party production plants in Argentina. According to FAIM, during 2016, we processed over 28.5% of the total volume of wheat processed in
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Argentina, making us the largest wheat flour producer in the country. Following the Cargill Acquisition, we now possess an installed milling capacity of approximately 3.13 million tonnes per year, according to MAGyP. In addition, according to Euromonitor, we are the largest exporter of flour in Argentina by volume, exporting 233,813 tonnes during 2016, representing 57.9% of the total flour exported in Argentina during 2016. Our Branded Industrial Products segment also includes our packaging production operation through the packaging business acquired from Cañuelas Pack S.A., which we use to differentiate our products through innovative and technologically advanced packaging. The chart below shows the evolution of our installed milling capacity.
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For the fiscal year ended November 30, 2016, our Branded Industrial Products segment generated AR$12,738 million (US$803 million) in net sales, of which AR$11,281 million, or 35% of our total net sales, consisted of net sales to third parties, and AR$1,137 million (US$72 million) in Adjusted Segment EBITDA, or 50% of our Total Adjusted Segment EBITDA.
The following charts show production for Argentine wheat milling production as well as Argentine exports and local flour sales from 2014 to 2016:
Argentine Wheat Milling Production | 2016Argentine Wheat Milling Production Ranking | |
Source: FAIM & INDEC |
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Argentine Exports of Flour | Argentine Sales of Flour | |
Source: FAIM & INDEC | Source: FAIM & INDEC |
For a further description of the CAGR rates described above, see "IndustryArgentina's Grain and Milling IndustryArgentina's Production and Export of Grains".
Agro-Services and Sustainable Sourcing. Through our Agro-Services and Sustainable Sourcing segment, we source agricultural products in which Argentina, the location of our primary sourcing activities, enjoys significant competitive advantages, with the main objective of ensuring the consistent supply of agricultural products to our other business segments at the lowest cost and highest quality possible. We foster and preserve direct contact and strong relationships with farmers through our Agro-Services business which acts as a one-stop supplier for farmers in our network providing a variety of products and services, including agricultural supplies such as seeds, fertilizers, farm machinery and other goods, as well as services such as insurance brokerage and, in each case, mostly in exchange for agricultural products. As of the date of this prospectus, we operate 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers located across ten provinces in Argentina, offering convenience to farmers and providing our sourcing business with ready access to a substantial portion of Argentina's productive agricultural area. We also offer drying, storage and conditioning services to our farmers through our 21 conditioning and storage centers which facilitate the geographic distribution
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of our sourcing operations. The following map shows the location of our Agro-Service and Sustainable Sourcing segment facilities:
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We also export a portion of our excess agricultural goods. We also operate a port, which is located in Las Palmas on the right bank of the Paraná River in northeastern Argentina and offers significantly reduced travel times on the Paraná River, resulting in a competitive advantage when compared to ports further upstream. Our port exports both containers and agricultural products and we benefit from its use to export products for all three of our business segments. We expect to continue to use the Las Palmas port to further increase our exports into Brazil and other countries in the region. We are also planning the development of an industrial park in Argentina, which we refer to as the Five Nations Industrial Park, next to the Las Palmas port, through which we will seek to attract businesses such as other consumer food product producers that may benefit from the competitive advantages created by our sourcing operations, food product manufacturing capability, distribution network in Argentina and export capacity through the Las Palmas port. For further information, see "BusinessNew Projects and InvestmentsFive Nations Industrial Park". For the fiscal year ended November 30, 2016, our Agro-Services and Sustainable Sourcing segment generated AR$23,284 million (US$1,467 million) in net sales of which $17,318 million, or 54% of our total net sales, consisted of net sales to third parties and AR$571 million (US$36 million) in Adjusted Segment EBITDA, or 25% of our Total Adjusted Segment EBITDA.
The following charts describe wheat production and yields for countries in the region in which we operate for the period from 2014-2017.
Wheat Production by Country
Source: 2016 USDA Report
Wheat Yield by Country
Source: 2016 USDA Report
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Production vs Consumption
Source: 2016 USDA Report
Key Strengths
Referential brands and strong market share in many of our retail products. Our referential brands are among the most well-known and traditional names in Argentina. Certain of these referential brands, notably 9 de Oro, can be found in all major retailers in Argentina and, we believe as a result, in nearly every household in the country. Complementing our brand portfolio in our biscuits, cookies and crackers segment, we offer crackers under our Paseo brand and cookies under our Cukis brand. We believe our flour products sold under our market-leading brands Pureza and Cañuelas are chosen by customers for their perceived high quality and healthiness and reputation for innovation through the various types of ready-mixed flours we offer. In vegetable oils, our Cañuelas brand enjoys positioning as a premium product and is recognized for its quality, superior packaging and healthy attributes. Our ready-mixed product portfolio includes flour mixes under the Pureza and Mamá Cocina brands. Other brands include San Agustín, Florencia and Múltiple. We believe that our focus on providing consumers
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with products that offer them solutions helps us maintain and strengthen our brands' top-of-mind recognition. Part of our brand strength is reflected in strong market share across our various product categories. For example, in Argentina, according to Nielsen Reports and CCR Reports, using annual market share measured through November 30, 2016, we had market shares in Argentina of 26.0% (vegetable oil), 41.7% (flour), 34.1% (biscuits sub-category), 27.0% (ready-mixed products) and 25.5% (bread crumbs).
Well-established distribution network for our Retail Products segment, which provides significant opportunities to expand product sales in Argentina and the region. We have developed a strong distribution network for our Retail Products segment, including major retailers in the countries in which we operate, and we believe we are able to leverage these relations to further expand regionally. We distribute our retail products through a wide variety of retail and other distribution channels, including some of the largest supermarkets in Argentina (such as Cencosud, Walmart and Carrefour), third-party distributors and other retailers such as small stores and fast food venues (including McDonald's and Subway) and gas stations (such as those owned by Shell and YPF). We believe our distribution network provides us with significant cross-selling opportunities that allow us to introduce new products under existing or new brands. For example, our distribution network allows us to launch products made from newly sourced agricultural products, such as rice crackers, and effectively reach customers. Similarly, we supply frozen food products for McDonald's in Uruguay and flour to Walmart in Chile. Moreover, we believe we have developed an extensive frozen distribution channel which includes affiliated refrigerated car services and intermediate refrigerated storage warehouses, allowing us to expand the reach of our frozen food product operations.
Well positioned to capture expected growth opportunities in Argentina and the region. We believe our strong position in all three of our business segments is driven by, among other things, the economies of scale we have achieved, our longstanding relationships with a network of suppliers and customers, our significant production and sourcing capacity, our commitment to technological development, and our experience in the food business. We regularly seek to implement technological innovations in production processes in order to improve efficiency, maintain our operational excellence and develop new solutions for our customers. As a result, we have significantly improved our productivity and operating costs in recent years as evidenced by our increased installed milling capacity and increased production capacity of our food production facilities. Our cost-effective and technologically advanced production processes make our products high quality and cost-competitive and provide stable cash-flow even during economic downturns, particularly as many of our products are basic staples of our consumers' diets.
Competitive advantage based on our access to Argentina's high quality primary agricultural products at the lowest cost. Our sourcing operations are primarily located in Argentina, which benefits from significant environmental, climatic and agricultural advantages relative to the rest of the region, including the relatively high fertility and productivity of its soil. This strategic advantage, together with the strength of our supply chain, provides us access to a stable and secure supply of high quality agricultural products at competitive prices. In addition, we believe that the scale of our sourcing and industrial food operations makes us the preferred business partner to the more than 8,000 farmers that sell their agricultural products to us and to other producers of retail products who buy our industrial food products. The scope of our sourcing capacity allows us to maximize the value of the agricultural products that we source, by directing them to the most profitable uses in our production processes and sales activities. We also benefit from our extensive infrastructure, including our conditioning and storage centers distributed across a substantial portion of Argentina's productive agricultural area.
Vertically integrated business model. Our involvement in each step of the value chain allows us to achieve economies of scale, save on costs, ensure the highest product quality and increase revenues through product innovation involving high levels of technology and automation. We also seek to
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enhance customer and producer loyalty through the reliability of the services offered in our sourcing business, the recognized quality of our products and the reach of our distribution network. At the same time, our vertical integration gives us a greater knowledge of trends in consumer demand and allows us to recognize market opportunities for future growth. For example, we developed a high oleic vegetable oil in hand with the cultivation of high oleic sunflower seeds by a select group of our most loyal farmers, which, following a testing period, was launched into production for processing in our industrial facilities. We packaged this new oil with our differentiated packaging and sold it under our well-recognized Cañuelas brand so as to offer a premium oil for health conscious customers. Similarly, our recently launched frozen food products line leverages the high quality of our flour, the advanced technology of our Spegazzini facility and the established distribution network of our existing retailers to reach end customers. The scale in every step of our production and distribution processes allows us to test new products and ideas without compromising significant additional resources and improving the speed to market and marginal returns.
Business model naturally hedged to currency fluctuations and prices of agricultural products. Historically, we have been able to increase the price of the food and agricultural products we sell to match increases, in U.S. Dollar terms, of our raw materials. As a result, prices for our retail products in our principal market of Argentina have historically recovered in U.S. Dollar terms following sharp movements in the international prices of agricultural products or the exchange rate of the Peso. These price increases have helped protect our profitability, in U.S. Dollar terms, from the effects of fluctuations in the prices of agricultural products or the devaluation of the Peso. Additionally, approximately 37% of our net sales in 2016 were exports, which are priced in U.S. Dollars and based on the international prices of the agricultural products we buy.
Inelastic demand for our products. Most of our products constitute staples of the standard consumer basket of food products. As a result, demand for our products has proven to be somewhat resistant to economic downturns as demand has remained stable in spite of reduced spending power on the part of customers. Similarly, the relatively resilient demand for our products has allowed us to adjust our prices by closely following movements in prices of agricultural products, thereby helping to preserve our margins.
We benefit from an experienced management team with a successful track record of value creation. Our executive officers have extensive experience in the food industry and have a track record of improving operating efficiency and managing costs. Our management team and other professionals are highly trained, and we have a results-oriented corporate culture that is focused on reducing operating costs and increasing revenues through a continuous focus on process improvement. We operate under a group of principles and tools that we believe constitute a proven methodology to maximize management effectiveness. This process implies a long-term commitment to measure, administer and improve our main processes. The goal of this process is to meet or exceed customers' expectation with the optimal use of our resources.
Business Strategy
Our mission is to add value to the agricultural products we source in which Argentina has a natural competitive advantage compared to the region. We seek to execute our mission through a vertically integrated business model that focuses on innovation and seeks to capture market opportunities through the launch of new products and the penetration of new markets.
We believe the strength of our vertically integrated business model and our new business evaluation criteria help us to achieve synergies between our new products and our existing businesses. We aim to launch products where we can achieve cost leadership, quality recognition and a strong position in market share. The evaluation criteria that forms our business strategy framework is illustrated in the chart below.
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The three growth vectors that comprise our business strategy are:
Continue to introduce new products in our existing product categories. Our research and development operations are constantly working to bring new and innovative products that leverage the strength of our existing brands and cost efficiencies while responding to growing consumer demand for healthy and convenient retail products. For example, we were the first Argentine food company to sell flour fortified with vitamins (before legislation was passed making it mandatory for all producers) as well as value-added flour products with natural yeast, including pre-mixed pizza dough, under our Pureza brand. Similarly, we recently launched rice crackers under our Retail Products segment to meet consumer demand while maximizing the sourcing opportunities available in our Agro-Services and Sustainable Sourcing segment. We have also launched a line of high-oleic sunflower oil which leverages the strength of our Cañuelas brand and the depth of our sourcing network. We intend to further build upon our success in the frozen food and food service business by increasing the size of our Spegazzini facility, which uses highly automated production processes. Our frozen product line is currently launching ready-made products, such as doughnuts and muffins.
Continue to diversify into new product categories by leveraging on the strengths of each of the steps of our production process. We believe that our integrated supply chain in conjunction with our experience in Retail Products allows us to successfully take new products from idea to execution phase swiftly and effectively. More recently, in 2016 we expanded into the frozen food business line through new direct-to-consumer retail products under our Mamá Cocina brand. Following construction, our Spegazzini facility started producing and commercializing frozen food products (including pre-baked bread, croissants and pizzas) through retailers and food services stores, all of which we intend to distribute through our existing frozen distribution channel.
Continue to increase our market presence in the region. We believe that our existing distribution network, our efficient production processes and high quality products make it easier for us to rollout new products in the region for which there might be significant demand. In particular, we plan to leverage our distribution network with Cencosud, Walmart and Carrefour to introduce new products in the region. Similarly, in Uruguay, we are currently present through various recognized brands and we expect to launch new retail products. In Brazil, we intend to use our experience in flour production and branded industrial products sales to commercialize branded consumer food products reformulated to match the tastes of the Brazilian market. We also plan to foster our commercial efforts in Chile and Bolivia by integrating the supply chain from our food production facilities located in the northern and western parts of Argentina and exporting tailor made products into both countries through our existing commercial offices. As part of these efforts, we will seek to leverage our existing relationships with customers with which we already do significant business in Uruguay and Chile. In addition, following the increase in milling capacity resulting from our recent Cargill Acquisition, we will seek to source more agricultural products in order to increase the production of our retail and branded industrial products and commercialize such products from our Retail Products and Branded Industrial Products segments into Brazil, Chile, Uruguay and Bolivia. In addition, we are planning the development of Five Nations Industrial Park right next to the Las Palmas port in Argentina, through which we will seek to attract businesses, such as other consumer food product producers, that may benefit from the competitive advantages created by our sourcing operations, product manufacturing capabilities, distribution network in Argentina and export capacity through the Las Palmas port. We expect to continue to identify and opportunistically open new markets in countries or regions where we believe we have commercial, productive and/or logistical competitive advantages.
We believe that the combination of our business strengths with our innovative product development strategy helps us to fulfill the changing needs of our customers while leveraging the efficiencies offered by our distribution model and vertically integrated production process. These
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capabilities are reinforced by our competitive advantage and generate steady and healthy financial returns. The following chart illustrates our integrated business model.
The Integrated Cycle of Our Business Model
Investments
We continuously make investments in our business to support our growth. Most recently, we have built our frozen product line facility in Carlos A. Spegazzini and also acquired Cargill's seven mills in Argentina.
Frozen Food Product Line Facility in Carlos A. Spegazzini, Argentina
We recently invested over US$100 million in our modern and technologically-advanced Spegazzini facility. The facility's production lines and equipment serve our frozen food, biscuits, cookies and crackers and bread crumbs products business lines in our Retail Products segment and cover dough preparation and the storage of frozen food products through technologically-advanced hybrid automated lines for the production of both dry and frozen retail products including pizzas, bread for a variety of uses, croissants and pastries, muffins, doughnuts, crackers and bread crumbs. As the sales volume of our products produced in our Spegazzini facility continues to grow, we plan to increase its production capacity.
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Cargill Acquisition
On August 31, 2016, we completed the Cargill Acquisition through which we acquired seven operating mills in Argentina, which have an installed milling capacity of 1.57 million tonnes of wheat per year. These mills have high fixed costs and low variable costs through which we believe we will experience significant synergies once they commence operations at full capacity as part of our Branded Industrial Products segment. The Cargill Acquisition offers us strategic benefits and the potential to realize what we believe will be significant synergies in part due to the geographic complementarity of the milling assets acquired with those we already own. Due to the costs currently associated with transportation, our mills in Argentina are economically attractive to our network of farmers. The mills acquired in the Cargill Acquisition resulted in little or no overlap with the geographic location of our existing mills. We believe that the additional capacity created by the Cargill Acquisition provides us with an opportunity to direct more of our industrial flour output in Argentina towards exports to other countries in the region, especially Brazil. The reliable supply of our Agro-Services and Sustainable Sourcing business as well as our extensive network of clients for our Branded Industrial Products segment and the growing demand of our Retail Products segment will allow us to improve the utilization rate of these mills in order to maximize their output and improve efficiency. We further believe that our logistical operations and our track record in operational efficiencies will improve output at the newly acquired mills over time.
At the time of acquisition, the acquired mills had been operating at an average of 47.5% of their installed milling capacity for the eight-month period ended August 30, 2016. For the period from the closing of the Cargill Acquisition through November 30, 2016, the business comprised in the Cargill Acquisition contributed AR$570 million (US$36 million) and AR$96 million (US$6 million), respectively, to the net sales and Adjusted Segment EBITDA of our Branded Industrial Products segment.
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Certain Operational and Financial Metrics
The following sets forth certain operational and financial metrics that we use in evaluating our business and results of operation:
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For the Fiscal Year Ended November 30, | |||||||||
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2016 | 2015 | 2014 | |||||||
Argentina Increase (decrease) in GDP |
(2.30 | )% | 2.65 | % | (2.51 | )% | ||||
Retail Products Segment |
||||||||||
Sales Volume (tonnes) |
398,185 | 402,315 | 411,956 | |||||||
Retail Products Production (tonnes) |
350,151 | 327,453 | 325,678 | |||||||
Total Retail Products Plants(1) |
8 | 8 | 6 | |||||||
Installed Capacity (tonnes) |
469,668 | 446,114 | 426,755 | |||||||
Average Installed Capacity Utilization Rate(2) |
74.6 | % | 73.4 | % | 76.3 | % | ||||
Net Sales (thousands of pesos) |
3,717,638 | 2,460,545 | 2,392,602 | |||||||
Margin Before Operating Expenses (thousands of pesos) |
1,398,838 | 692,774 | 733,393 | |||||||
Margin Before Operating Expenses / Net Sales |
37.6 | % | 28.2 | % | 30.7 | % | ||||
Adjusted Segment EBITDA(3) (thousands of pesos) |
568,793 | 220,250 | 312,504 | |||||||
Adjusted Segment EBITDA Margin(6) |
15.30 | % | 8.95 | % | 13.06 | % | ||||
Branded Industrial Products Segment |
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Total Wheat Processed, Before Cargill Acquisition (tonnes) |
1,108,907 | 1,108,975 | 1,005,077 | |||||||
Total Wheat Processed, Including Cargill Acquisition (tonnes)(7) |
1,277,420 | | | |||||||
Total Flour Sales, Including Cargill Acquisition (tonnes) |
904,230 | 815,115 | 792,535 | |||||||
Branded Industrial Flour Plants(4) |
16 | 9 | 9 | |||||||
Other Branded Industrial Plants(4) |
2 | 2 | 2 | |||||||
Total Installed Wheat Mill Capacity Before Cargill Acquisition (tonnes) |
1,549,632 | 1,450,632 | 1,450,632 | |||||||
Total Installed Wheat Mill Capacity After Cargill Acquisition (tonnes) |
3,118,656 | |||||||||
Total Installed Mill Utilization Rate, Not Including Cargill Acquisition |
71.6 | % | 76.4 | % | 69.3 | % | ||||
Net Sales (thousands of pesos) |
12,738,399 | 10,850,231 | 7,652,155 | |||||||
Margin Before Operating Expenses (thousands of pesos) |
4,010,312 | 2,846,600 | 1,985,250 | |||||||
Margin Before Operating Expenses / Net Sales |
31.5 | % | 26.2 | % | 25.9 | % | ||||
Adjusted Segment EBITDA(3) (thousands of pesos) |
1,137,416 | 337,723 | 354,164 | |||||||
Adjusted Segment EBITDA Margin(6) |
8.93 | % | 3.11 | % | 4.63 | % | ||||
Agro-Services and Sustainable Sourcing Segment |
||||||||||
Volume Bought from Farmers (tonnes) |
5,112,811 | 5,447,172 | 4,211,445 | |||||||
Net Sales (thousands of pesos) |
23,284,411 | 14,390,070 | 14,991,390 | |||||||
Margin Before Operating Expenses (thousands of pesos) |
1,826,463 | 1,406,056 | 1,434,704 | |||||||
Margin Before Operating Expenses / Net Sales |
7.8 | % | 9.8 | % | 9.6 | % | ||||
Adjusted Segment EBITDA(3) (thousands of pesos) |
570,550 | 534,643 | 222,227 | |||||||
Adjusted Segment EBITDA Margin(6) |
2.45 | % | 3.72 | % | 1.48 | % | ||||
Port |
1 | 1 | 1 | |||||||
Total Number of Branches |
62 | |||||||||
Total Number of One-Stop Supply Stores |
44 | |||||||||
Total Number of Conditioning and Storage Centers |
21 |
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plant or mill's utilization rate, capacity and production, see "BusinessProperties and FacilitiesRetail Products and Branded Industrial Products Segments".
Our Offices
Our corporate offices are located at John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. Our telephone number is +54 (22) 2643-2885. Our website is http://www.molinocanuelas.com.ar. Information contained or accessible through our website is not incorporated by reference in, and should not be considered part of, this prospectus.
Recent Developments
On December 22, 2016, we entered into a US$100,000,000 pre-export finance facility agreement with ING Bank N.V., or ING. We entered into four separate loans under the facility agreement with ING, each for an amount of US$25,000,000 and an interest rate equal to the 90 day Libor plus 2.75%. On May 7, 2017, the pre-export finance facility was amended and the maturity date of the four loans thereunder was extended from June 21, 2017 to March 31, 2018. We refer to the above facility, as so amended, as the ING Facility. In connection with the loans under the ING Facility, we have assigned certain qualifying export agreements to ING.
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The following is a brief summary of the terms of the Global Offering. For a more complete description of our Class B ordinary shares and the ADSs, see "Description of our Share Capital" and "Description of the American Depositary Shares" in this prospectus.
Issuer |
Molino Cañuelas S.A.C.I.F.I.A. |
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Selling shareholders |
Aldo Adriano Navilli, Ricardo Alberto Navilli, Carlos Adriano Navilli, Adriana Elba Navilli and Marcos Aníbal Villemur. We refer to these individuals collectively as the Navilli family or as our principal shareholders. |
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Following completion of the Global Offering, the Navilli family will retain a controlling stake in the Company as the sole holders of our Class A ordinary shares. This controlling stake is discussed in detail under "Risks Related to the ADSs and our Class B Ordinary SharesWe are controlled by our principal shareholders". For further information, see "Principal and Selling Shareholders". |
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Class B ordinary shares offered in the Global Offering |
We are offering Class B ordinary shares and the selling shareholders are offering Class B ordinary shares in the international offering and the Argentine offering. We refer to the offering in the United States and other jurisdictions outside of Argentina as the "international offering" and to the offering in Argentina as the "Argentine offering". We refer to the international offering together with the Argentine offering as the Global Offering. |
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Class B ordinary shares offered in the international offering |
We and the selling shareholders are offering ADSs, each representing Class B ordinary shares, through the international underwriters in the United States and in other countries outside Argentina (or ADSs if the international underwriters exercise their option to purchase additional ADSs, representing Class B ordinary shares, in full). |
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Class B ordinary shares offered in the Argentine offering |
Concurrently with the international offering, we and the selling shareholders, Class B ordinary shares are being offered in a public offering in Argentina through an Argentine placement agent pursuant to a Spanish-language offering document with the same date as this prospectus. The prospectus for the Argentine offering, although in a different format in accordance with CNV regulations, contains substantially the same information as contained in this prospectus. |
20
Over-allotment option |
We have granted the international underwriters the right for a period of 30 days to purchase up to an additional ADSs, representing Class B ordinary shares, at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any. |
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Pre-emptive rights |
Pursuant to Argentine law, all of our existing shareholders have pre-emptive rights to subscribe for new Class B ordinary shares, including any additional Class B ordinary shares corresponding to the over-allotment option, in a number sufficient to maintain their proportionate holdings in our total capital stock. In addition, all of our existing shareholders have accretion rights, which permit them to subscribe for new Class B ordinary shares, which are not subscribed for by our other existing shareholders in proportion with the percentage of Class B ordinary shares for which the subscribing existing shareholder has exercised its pre-emptive rights. In order to permit the Global Offering, our existing shareholders, including the selling shareholders, have waived the exercise of their pre-emptive and accretion rights in connection with the offering of the new Class B ordinary shares (including any additional Class B ordinary shares to cover over-allotments, if any), representing 100% of the pre-emptive and accretion rights in respect of capital increase. |
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Offering price |
We expect that the offering price for the international offering will be between US$ and US$ per ADS (equivalent to AR$ and AR$ per ordinary share, based on a venta de divisas exchange rate of AR$ : US$1.00 reported by the Banco de la Nación Argentina on , 2017). |
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Listing |
We have applied to have the ADSs approved for listing on the NYSE under the symbol "MOLC". We have also applied to list and trade our Class B ordinary shares on the BYMA under the symbol " ". |
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Share capital before and after Global Offering |
Prior to the Global Offering, our share capital consisted of AR$15,000,000 represented by 150,000,000 ordinary, non-endorsable Class A shares, with a par value of AR$0.10 and the right to five votes per Class A ordinary share. |
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|
Pursuant to the resolutions adopted in our April 5, 2017 shareholders' meeting prior to the Delivery Date, the selling shareholders shall convert Class A ordinary shares into Class B ordinary shares, which we refer to as the Share Conversion, and such Class B ordinary shares will be offered in the Global Offering by the selling shareholders. After the Share Conversion and the authorization by the CNV of the public offering of our Class B ordinary shares is obtained, we will have Class A ordinary shares and Class B ordinary shares. |
21
|
Immediately after the Global Offering our principal shareholders, the Navilli family, will own shares representing % of our total capital (including 100% of the Class A ordinary shares) and % of total voting rights, assuming the placement of all Class B ordinary shares offered and no exercise of international underwriters' over-allotment option. If the international underwriters exercise their over-allotment option in full, we will have Class A ordinary shares and Class B ordinary shares outstanding, and our principal shareholders, the Navilli family, will own shares representing % of our total capital (including 100% of the Class A ordinary shares) and % of total voting rights. |
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|
Each ordinary share of our share capital represents the same economic interests, except that holders of our Class A ordinary shares shall be entitled to five votes per Class A ordinary share and holders of our Class B ordinary shares shall be entitled to one vote per Class B ordinary share. All such ordinary shares shall be book-entry shares, with a par value of AR$0.10 per share. See "Description of our Share Capital". |
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|
Following completion of the Global Offering, the Navilli family will retain a controlling stake in the Company as the sole holders of our Class A ordinary shares. This controlling stake is discussed in detail under "Risks Related to the ADSs and our Class B Ordinary SharesWe are controlled by our principal shareholders". For further information, see "Principal and Selling Shareholders". |
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Use of proceeds |
We estimate that the net proceeds to us in the Global Offering (based on the midpoint of the range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated expenses incurred in connection with the Global Offering, will be US$ million. If the international underwriters exercise their over-allotment option in full, we estimate that our net proceeds will be approximately US$ million. |
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|
We will not receive any proceeds from the sale of ADSs or Class B ordinary shares by the selling shareholders. |
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|
We intend to use the net proceeds from the Global Offering for general corporate purposes. |
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|
See "Use of Proceeds". |
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American Depositary Shares offered |
Each ADS represents Class B ordinary shares and may be evidenced by an American Depositary Receipt, or ADR. The ADSs will be issued under a deposit agreement among us, The Bank of New York Mellon, or the ADS Depositary, and the registered holders and indirect holders and beneficial owners from time to time of ADSs issued thereunder. |
22
Voting rights |
Holders of our Class B ordinary shares are entitled to one vote for each Class B ordinary share at any of our shareholders' meetings. See "Description of our Share Capital". Pursuant to the deposit agreement and subject to Argentine law and our bylaws, holders of ADSs are entitled to instruct the ADS Depositary to vote or cause to be voted the number of Class B ordinary shares represented by such ADSs. See "Description of the American Depositary Shares". For a description of certain agreements among our shareholders concerning the voting of our shares, see "Principal and Selling Shareholders". References to our bylaws in this prospectus are to our bylaws as adopted upon the effectiveness of the Global Offering. |
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|
Holders of Class A ordinary shares are entitled to five votes per Class A ordinary share; provided however, that holders of Class A ordinary shares are entitled to only one vote with regard to certain issues detailed in the last paragraph of Article 244 of the Argentine General Companies Law 19.550, as amended, which we refer to as the Argentine General Companies Law; provided further that the favorable vote of two thirds of the votes held by the holders of Class A ordinary shares is required for certain specific matters. See "Description of our Share CapitalBylawsShareholders' Meetings". |
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Dividends |
Under Argentine law, the declaration, payment and amount of dividends on the Class B ordinary shares are subject to the approval of shareholders and certain other requirements. Subject to the deposit agreement, holders of ADSs will be entitled to receive dividends, if any, declared on the Class B ordinary shares represented by such ADSs to the same extent as the holders of the Class B ordinary shares. Cash dividends will be paid in Pesos and will be converted by the ADS Depositary into U.S. Dollars at an exchange rate determined by it on the date of conversion and paid to the holders of ADSs, net of any dividend distribution fees, currency conversion expenses, taxes or governmental charges. See "Dividend Policy", "Description of our Share Capital" and "Description of the American Depositary Shares". |
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|
We currently have no plans to pay dividends following the completion of the Global Offering because we expect to retain our earnings for use in the development and expansion of our business. See "Dividend Policy". |
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Lock-up agreements |
We, the selling shareholders and our directors and executive officers have agreed with the international underwriters, subject to certain exceptions, not to sell or dispose of any ordinary shares or securities convertible into or exchangeable or exercisable for any ordinary shares of our capital stock during the period commencing on the date of this prospectus until 180 days after the completion of the Global Offering. |
23
Principal shareholders |
The following table summarizes the percentage of our outstanding ordinary shares that will be held by our principal shareholders, in the form of Class A ordinary shares, after giving effect to the Global Offering: |
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|
Shares Held |
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|
Aldo Adriano Navilli | % | ||||
|
Carlos Adriano Navilli | % | ||||
|
Ricardo Alberto Navilli | % | ||||
|
Adriana Elba Navilli | % | ||||
|
Marcos Aníbal Villemur | % | ||||
|
Following completion of the Global Offering, the Navilli family will retain a controlling stake in the Company as the sole holders of our Class A ordinary shares. This controlling stake is discussed in detail under "Risks Related to the ADSs and our Class B Ordinary Shares", "We are controlled by our principal shareholders". For further information, see "Principal and Selling Shareholders". |
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ADS Depositary |
The Bank of New York Mellon |
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Taxation |
For a discussion of the material U.S. and Argentine federal tax considerations relating to an investment in the ADSs or our Class B ordinary shares, see "Taxation". |
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Jurisdiction and arbitration |
Pursuant to Article 46 of Law No. 26.831, as amended, which we refer to as the Argentine Capital Markets Law, companies whose shares are listed on any authorized market (including the BYMA), such as we intend our Class B ordinary shares to be, are subject to the jurisdiction of the arbitration court of such authorized market for all matters concerning such companies' relationship with shareholders and investors, without prejudice to the right of shareholders and investors to submit their claims to the courts of the City of Buenos Aires. For all matters relating to the deposit agreement and the ADSs, we will submit to the jurisdiction of the state and federal courts located in the state of New York. |
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Risk Factors |
Investing in our Class B ordinary shares involves risks. See "Risk Factors" beginning on page 31 for a discussion of certain significant risks you should consider before making an investment decision. |
Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the over-allotment option granted to the international underwriters.
24
SUMMARY CONSOLIDATED COMBINED FINANCIAL DATA
You should read the summary historical consolidated combined financial data presented below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operation", "Selected Consolidated Combined Financial Data", and our audited consolidated combined financial statements and related notes included elsewhere in this prospectus.
The summary historical consolidated combined financial information presented below under the captions "Consolidated Combined Statement of Comprehensive Income Data" and "Consolidated Combined Statement of Cash Flow Data" for the years ended November 30, 2014, 2015 and 2016 and the summary historical consolidated combined financial information presented below under the caption "Consolidated Combined Statement of Financial Position Data" as of December 1, 2013 and November 30, 2014, 2015 and 2016 have been derived from our audited consolidated combined financial statements included elsewhere in this prospectus.
We prepare our audited consolidated combined financial statements in accordance with IFRS as issued by the IASB. We have applied all IFRS issued by the IASB effective at the time of preparing our consolidated combined financial statements. We applied IFRS for the first time for our fiscal year ended November 30, 2016, which included comparative information for the fiscal year ended November 30, 2015 and 2014. The opening IFRS statement of financial position was prepared as of our transition date of December 1, 2013. Note 2 to our audited consolidated combined financial statements contains the details of our transition to IFRS and application of IFRS 1.
Our audited consolidated combined financial statements are not adjusted for inflation in accordance with IAS29. For more information on inflation, see "Presentation of Financial and Certain Other InformationInflation". Solely for the convenience of the reader, we have translated certain Peso amounts into U.S. Dollars at the venta de divisas exchange rate reported by the Banco de la Nación Argentina for November 30, 2016, which was AR$15.87 to US$1.00. We make no representation that the Peso or U.S. Dollar amounts actually represent or could have been or could be converted into U.S. Dollars at the rates indicated, at any particular rate or at all. For a further description of the exchange rate of the Peso to the U.S. Dollar, see "Exchange Rates and Exchange Controls".
25
|
For the Fiscal Year Ended November 30, |
For the Fiscal Year Ended November 30, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statements of Comprehensive Income Data |
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Net sales |
2,036,402 | 32,317,700 | 22,134,392 | 19,821,199 | |||||||||
Cost of sales |
(1,580,472 | ) | (25,082,087 | ) | (17,188,962 | ) | (15,667,852 | ) | |||||
| | | | | | | | | | | | | |
Margin Before Operating Expenses |
455,930 | 7,235,613 | 4,945,430 | 4,153,347 | |||||||||
| | | | | | | | | | | | | |
Selling expenses |
(278,417 | ) | (4,418,472 | ) | (3,546,987 | ) | (2,967,422 | ) | |||||
Administrative expenses |
(52,129 | ) | (827,287 | ) | (510,605 | ) | (443,732 | ) | |||||
Other operating income, net |
686 | 10,882 | 27,637 | 24,088 | |||||||||
| | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
126,070 | 2,000,736 | 915,475 | 766,281 | |||||||||
| | | | | | | | | | | | | |
Financial income |
20,380 | 323,429 | 230,221 | 267,655 | |||||||||
Financial costs |
(67,451 | ) | (1,070,446 | ) | (687,128 | ) | (506,041 | ) | |||||
Exchange differences, net |
(91,267 | ) | (1,448,401 | ) | (398,464 | ) | (311,690 | ) | |||||
| | | | | | | | | | | | | |
Financial results, net |
(138,338 | ) | (2,195,418 | ) | (855,371 | ) | (550,076 | ) | |||||
| | | | | | | | | | | | | |
Gain on acquisition of businesses(2) |
68,326 | 1,084,327 | | | |||||||||
| | | | | | | | | | | | | |
Profit Before Income Tax |
56,058 | 889,645 | 60,104 | 216,205 | |||||||||
| | | | | | | | | | | | | |
Income tax expense |
(1,592 | ) | (25,263 | ) | (48,173 | ) | (68,396 | ) | |||||
| | | | | | | | | | | | | |
Profit for the Year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | | |
Adjusted average number of ordinary shares outstanding |
150,000,000 | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
Profit per share attributable to equity holders (in Pesos or U.S. Dollars as the case may be) |
0.36 | 5.76 | 0.08 | 0.99 | |||||||||
OTHER COMPREHENSIVE INCOME |
|||||||||||||
Items that may be reclassified as profit or loss |
|||||||||||||
Exchange difference on translation of foreign operations |
11,055 | 175,444 | 19,564 | 71,072 | |||||||||
Items that will not be reclassified as profit or loss |
|||||||||||||
Revaluation of property, plants and equipment |
184,624 | 2,929,983 | 915,093 | 1,029,368 | |||||||||
Income tax expense |
(64,808 | ) | (1,028,497 | ) | (320,531 | ) | (360,525 | ) | |||||
| | | | | | | | | | | | | |
Total Other Comprehensive Income |
130,871 | 2,076,930 | 614,126 | 739,915 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total Comprehensive Income |
185,338 | 2,941,312 | 626,057 | 887,724 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
26
|
As of November 30, |
As of November 30 | As of December 1, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statements of Financial Position Data |
2016(1) | 2016 | 2015 | 2014 | 2013 | |||||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
||||||||||||||
ASSETS(2) |
||||||||||||||||
Non-Current Assets |
||||||||||||||||
Property, plant and equipment, net |
738,161 | 11,714,621 | 5,348,675 | 4,160,354 | 2,639,214 | |||||||||||
Investment property, net |
3,434 | 54,494 | 72,626 | 70,337 | 577 | |||||||||||
Intangible assets, net |
7,213 | 114,471 | 14,359 | 15,820 | 9,957 | |||||||||||
Investments in associates |
| | | 653 | 443 | |||||||||||
Deferred income tax assets |
2,164 | 34,350 | 18,478 | 21,232 | 6,519 | |||||||||||
Other investments |
1 | 15 | 133 | 235 | 83 | |||||||||||
Other receivables, net |
22,671 | 359,790 | 78,569 | 61,313 | 101,996 | |||||||||||
Trade receivables, net |
| | 4,439 | | | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Assets |
773,645 | 12,277,741 | 5,537,279 | 4,329,944 | 2,758,789 | |||||||||||
| | | | | | | | | | | | | | | | |
Current Assets |
||||||||||||||||
Inventories |
156,943 | 2,490,685 | 1,538,785 | 1,292,022 | 832,855 | |||||||||||
Other receivables, net |
70,972 | 1,126,326 | 903,022 | 517,126 | 495,189 | |||||||||||
Trade receivables, net |
352,401 | 5,592,599 | 4,382,579 | 2,846,578 | 2,140,152 | |||||||||||
Other investments |
| | 109 | 1,724 | ||||||||||||
Financial assets at fair value |
| | 26,158 | 23,015 | 17,580 | |||||||||||
Derivatives |
19,859 | 315,164 | 211,321 | 158,633 | 69,471 | |||||||||||
Cash and cash equivalents |
239,109 | 3,794,667 | 943,731 | 1,121,351 | 865,445 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Assets |
839,284 | 13,319,441 | 8,005,596 | 5,958,834 | 4,422,416 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL ASSETS |
1,612,929 | 25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | |||||||||||
| | | | | | | | | | | | | | | | |
SHAREHOLDERS' EQUITY(2) |
||||||||||||||||
Common stock |
756 | 12,000 | 12,000 | 12,000 | 12,000 | |||||||||||
Additional paid-in capital |
1,601 | 25,414 | 25,414 | 25,414 | 25,414 | |||||||||||
Reserves |
297,258 | 4,717,491 | 2,640,561 | 2,026,435 | 1,286,520 | |||||||||||
Retained earnings |
46,932 | 744,815 | 471,812 | 477,881 | 329,995 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL SHAREHOLDERS' EQUITY |
346,548 | 5,499,720 | 3,149,787 | 2,541,730 | 1,653,929 | |||||||||||
| | | | | | | | | | | | | | | | |
LIABILITIES |
||||||||||||||||
Non-Current Liabilities |
||||||||||||||||
Borrowings |
392,837 | 6,234,323 | 1,215,844 | 1,224,210 | 620,550 | |||||||||||
Deferred income tax liabilities |
173,097 | 2,747,057 | 1,251,968 | 982,175 | 643,322 | |||||||||||
Trade and other payables |
11,912 | 189,041 | 13,850 | 72,760 | 13,498 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Liabilities |
577,846 | 9,170,421 | 2,481,662 | 2,279,145 | 1,277,370 | |||||||||||
| | | | | | | | | | | | | | | | |
Current Liabilities |
||||||||||||||||
Borrowings |
261,167 | 4,144,725 | 3,898,992 | 2,128,053 | 2,235,964 | |||||||||||
Current income tax payable |
6,542 | 103,828 | 1,563 | 10,148 | 27,659 | |||||||||||
Provisions |
4,272 | 67,789 | 27,649 | 13,600 | 10,212 | |||||||||||
Derivatives |
73 | 1,154 | 1,365 | 27,479 | 1,310 | |||||||||||
Trade and other payables |
416,480 | 6,609,545 | 3,981,857 | 3,288,623 | 1,974,761 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Liabilities |
688,534 | 10,927,041 | 7,911,426 | 5,467,903 | 4,249,906 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES |
1,266,381 | 20,097,462 | 10,393,088 | 7,747,048 | 5,527,276 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL EQUITY AND LIABILITIES |
1,612,929 | 25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | |||||||||||
| | | | | | | | | | | | | | | | |
27
|
For the Year Ended November 30, |
For the Fiscal Year Ended November 30, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statement of Cash Flow Data |
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Change in cash and cash equivalents |
|||||||||||||
Cash and cash equivalents at beginning of year |
59,466 | 943,731 | 1,121,351 | 865,445 | |||||||||
Cash and cash equivalents at end of year |
239,109 | 3,794,667 | 943,731 | 1,121,351 | |||||||||
| | | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents |
179,643 | 2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | | |
Cash flows from operating activities: |
|||||||||||||
Profit for the year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
Income tax expense |
1,592 | 25,263 | 48,173 | 68,396 | |||||||||
Adjustments for: |
|||||||||||||
Depreciation |
16,729 | 265,496 | 172,574 | 120,190 | |||||||||
Amortization |
663 | 10,527 | 4,567 | 2,424 | |||||||||
Change in fair value adjustment in derivatives |
(6,557 | ) | (104,054 | ) | (78,803 | ) | (62,992 | ) | |||||
Provisions |
2,529 | 40,140 | 14,049 | 3,388 | |||||||||
Bad debt accrual |
1,906 | 30,251 | 1,261 | 13,906 | |||||||||
Results from sale of equity investments |
(272 | ) | (4,310 | ) | (13,875 | ) | | ||||||
Gain on acquisition of businesses |
(68,326 | ) | (1,084,327 | ) | | | |||||||
Results from sale of property, plant and equipment |
(143 | ) | (2,271 | ) | (4,852 | ) | (940 | ) | |||||
Net interest accrued |
47,071 | 747,017 | 456,907 | 238,386 | |||||||||
Net exchange differences accrued and not paid |
85,397 | 1,355,250 | 36,607 | 37,591 | |||||||||
Interest collected |
19,815 | 314,460 | 228,606 | 264,711 | |||||||||
Income tax paid |
(3,151 | ) | (50,014 | ) | (80,686 | ) | (54,544 | ) | |||||
Increase in Inventories |
(46,084 | ) | (731,347 | ) | (246,763 | ) | (459,167 | ) | |||||
Increase in Accounts receivable |
(107,757 | ) | (1,710,106 | ) | (1,943,592 | ) | (687,680 | ) | |||||
Increase in Accounts payable |
162,091 | 2,572,380 | 632,524 | 1,373,124 | |||||||||
Change in other operating assets and liabilities, net |
(740 | ) | (11,742 | ) | (49,608 | ) | (117,643 | ) | |||||
Net cash generated from (used in) operating activities |
159,231 | 2,526,995 | (810,980 | ) | 886,959 | ||||||||
| | | | | | | | | | | | | |
Investing activities |
|||||||||||||
Purchases of property, plant and equipment |
(80,960 | ) | (1,284,842 | ) | (419,393 | ) | (563,511 | ) | |||||
Purchases of investment property |
(384 | ) | (6,100 | ) | (2,468 | ) | (69,609 | ) | |||||
Purchases of intangible assets |
(156 | ) | (2,479 | ) | (3,129 | ) | (6,801 | ) | |||||
Sales of property plant and equipment |
1,365 | 21,670 | 17,653 | 36,423 | |||||||||
Acquisition of businesses |
(46,389 | ) | (736,190 | ) | | | |||||||
Sales of related companies |
2,716 | 43,095 | 14,573 | | |||||||||
Other investments |
| | (492 | ) | 507 | ||||||||
Net cash used in investing activities |
(123,809 | ) | (1,964,846 | ) | (393,256 | ) | (602,991 | ) | |||||
| | | | | | | | | | | | | |
Financing activities |
|||||||||||||
Loans paid |
(708,889 | ) | (11,250,069 | ) | (3,999,372 | ) | (3,553,332 | ) | |||||
Borrowings |
931,126 | 14,776,968 | 5,698,424 | 3,983,752 | |||||||||
Interest paid |
(65,869 | ) | (1,045,344 | ) | (655,479 | ) | (504,329 | ) | |||||
Effects of reorganization |
(19,540 | ) | (310,099 | ) | | 77 | |||||||
Dividends paid |
(4,675 | ) | (74,200 | ) | (16,200 | ) | | ||||||
Net cash generated from (used in) financing activities |
132,152 | 2,097,256 | 1,027,373 | (73,832 | ) | ||||||||
| | | | | | | | | | | | | |
Foreign exchange (losses) / gains on cash and cash equivalents |
12,069 | 191,531 | (757 | ) | 45,770 | ||||||||
Net increase / (decrease) in cash and cash equivalents |
179,643 | 2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | | |
Non-cash investing and financing activities |
|||||||||||||
Acquisition of property, plant and equipment by finance lease |
| | 2,971 | 2,414 | |||||||||
| | | | | | | | | | | | | |
Dividends declared not paid |
13,049 | 207,080 | 1,800 | | |||||||||
| | | | | | | | | | | | | |
Dividends declared per share |
0.12 | 1.88 | 0.12 | | |||||||||
| | | | | | | | | | | | | |
28
Adjusted Segment EBITDA
The following tables set forth certain key financial and operational data for the fiscal years ended November 30, 2014, 2015 and 2016.
|
For the Fiscal Year Ended November 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2016(2) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Adjusted Segment EBITDA(1) Retail Products segment |
35,841 | 568,793 | 220,250 | 312,504 | |||||||||
Adjusted Segment EBITDA(1) Branded Industrial Products segment |
71,671 | 1,137,416 | 337,723 | 354,164 | |||||||||
Adjusted Segment EBITDA(1) Agro-services and Sustainable Sourcing segment |
35,951 | 570,550 | 534,643 | 222,227 | |||||||||
Adjusted Segment EBITDA Margin(3) Retail Products segment |
| 15.30 | % | 8.95 | % | 13.06 | % | ||||||
Adjusted Segment EBITDA Margin(3) Branded Industrial Products segment |
| 8.93 | % | 3.11 | % | 4.63 | % | ||||||
Adjusted Segment EBITDA Margin(3) Agro-services and Sustainable Sourcing segment |
| 2.45 | % | 3.72 | % | 1.48 | % |
Non-IFRS Measurements
Total Adjusted Segment EBITDA
The following table presents a reconciliation of Total Profit to Total Adjusted Segment EBITDA for each of the fiscal years indicated.
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For the Fiscal Year Ended November 30, | ||||||||||||
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2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Profit for the Year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
Gain on acquisition of businesses |
(68,326 | ) | (1,084,327 | ) | | | |||||||
Depreciation & Amortization |
17,393 | 276,023 | 177,141 | 122,614 | |||||||||
Financial income |
(20,380 | ) | (323,429 | ) | (230,221 | ) | (267,655 | ) | |||||
Financial costs |
67,451 | 1,070,446 | 687,128 | 506,041 | |||||||||
Exchange differences, net |
91,267 | 1,448,401 | 398,464 | 311,690 | |||||||||
Income tax expense |
1,592 | 25,263 | 48,173 | 68,396 | |||||||||
Total Adjusted Segment EBITDA (unaudited) |
143,463 | 2,276,759 | 1,092,616 | 888,895 |
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Net Debt to Total Adjusted Segment EBITDA
We use the ratio of Net Debt to Total Adjusted Segment EBITDA as one of our principal measures of capital management. We define Net Debt to Total Adjusted Segment EBITDA as the ratio of borrowings minus cash and cash equivalents to Total Adjusted Segment EBITDA. The table below shows a reconciliation of this non-IFRS financial measure to total borrowings as follows:
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As of and for the Fiscal Year Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
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2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Borrowings(1) |
10,379,048 | 5,114,836 | 3,352,263 | |||||||
Cash and cash equivalents |
3,794,667 | 943,731 | 1,121,351 | |||||||
Net debt (unaudited) |
6,584,381 | 4,171,105 | 2,230,912 | |||||||
| | | | | | | | | | |
Total Adjusted Segment EBITDA (unaudited) |
2,276,759 | 1,092,616 | 888,895 | |||||||
| | | | | | | | | | |
Net debt/ Total Adjusted Segment EBITDA (unaudited) |
2.89 | 3.82 | 2.51 | |||||||
| | | | | | | | | | |
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Investing in our Class B ordinary shares or the ADSs involves a high degree of risk, including the possibility of loss of your entire investment. Before making an investment decision, you should carefully consider the information contained in this prospectus, particularly the risks described below, as well as in our audited consolidated combined financial statements included elsewhere in this prospectus. Our business activities, cash flow, financial condition, results of operations and prospects could be materially and adversely affected by any of these risks. The market price of our Class B ordinary shares and the ADSs may decrease due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us. Additional risks and uncertainties not currently known to us, or those that we currently deem to be immaterial, may also materially and adversely affect our business activities, cash flow, financial condition, results of operations and prospects, and affect the market price of our Class B ordinary shares and the ADSs.
Risks Related to Argentina
Investing in an emerging economy such as Argentina entails certain inherent risks.
Argentina is an emerging economy, and investing in such markets generally carries risks. These risks include political, social and economic instability that may affect Argentina's economic results. In the past, instability in Argentina has been caused by many different factors, including the following:
Any of the above factors either individually or taken together could have adverse consequences on the Argentine economy and on our business, results of operations and financial condition.
Political and economic instability in Argentina similar to what has been experienced in the recent past, may have an adverse effect on the Argentine economy and our business, results of operations and financial condition.
Argentina has experienced political and socio economic instability in the past and may experience further instability in the future. In 2001 and 2002, Argentina suffered a major political, economic and social crisis, which resulted in institutional instability and a severe contraction of the economy (GDP contracted 10.9% in 2002), with significant increases in unemployment and poverty rates. Among other consequences, the crisis caused a large currency devaluation and led the federal government of
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Argentina to default on its external debt. In response, the federal government implemented a series of emergency measures, including strict foreign exchange controls and monthly limits on bank withdrawals.
The Argentine economy experienced a recovery following the 2001-2002 crisis. Since 2008, however, it has struggled to curb strong inflationary pressures and stagnant growth, primarily as a result of the following factors: the monetary and fiscal policies introduced by the Fernández de Kirchner administration (which remained in office until December 2015); strict foreign exchange controls coupled with overvalued real exchange rates that constrained foreign trade and investments; inability to obtain international financing and a decline in prices of agricultural products. The ensuing erosion of confidence in the Argentine economy resulted, among other things, in capital outflows, decreasing investment, a significant decline in the Central Bank's international reserves, and political and social unrest. According to restated information released by the INDEC, Argentina's real GDP grew by approximately 2.4% in 2013, decreased by approximately 2.5% in 2014 and grew by approximately 2.6% in 2015. According to preliminary estimations published by the INDEC, Argentina's real GDP decreased by 2.3% during the year ended 2016 compared with 2015.
A new government led by Mr. Mauricio Macri was elected in November 2015 and has introduced several economic and policy reforms since then. For a further description of recent reforms, see "BusinessChanges in Argentine Politics". In addition, Argentina re-entered the international capital markets, in April 2016, through an issuance of US$16.5 billion in new debt securities, and applied US$9.3 billion of the total amount raised to satisfy payments on settlement agreements with holders of approximately US$8.2 billion principal amount of defaulted bonds. The United States District Court in New York ordered the vacatur of all pari passu injunctions upon confirmation of such payments. As of the date of this prospectus, although the vast majority of claims in litigation have been settled, additional marginal litigation initiated by some holdout creditors continues in several jurisdictions. See "Argentina's ability to obtain financing from international markets may been limited, which may in turn impair its ability to implement reforms and public policies and faster economic growth".
As of the date of this prospectus, the impact that these measures taken by the Macri administration will have on the Argentine economy as a whole cannot be predicted, and the Macri administration's ability to implement all announced measures as currently contemplated cannot be assured. In addition, there is uncertainty as to which measures announced during the Presidential election campaign will be implemented by the Macri administration and when. In particular, we cannot predict how the Macri administration will address certain political and economic issues that were central during the Presidential election campaign, such as the financing of public expenditures, public services subsidies and tax reforms, or the impact that any measures related to these issues that are implemented by the Macri administration will have on the Argentine economy as a whole. Additionally, in the recent elections, political parties opposed to the Macri administration retained a majority of the seats in the federal congress, which will require the Macri administration to seek political support from the opposition for its economic proposals. This creates further uncertainty in the ability of the Macri administration to pass any measures. The inability of the Macri administration to implement its proposed measures as a result of lack of political support and the uncertainty in the results of the congressional elections to be held in October 2017 may adversely affect the Argentine economy and financial condition and, our business, results of operations and financial condition.
Continuing inflation may have an adverse effect on the Argentine economy, and, as a consequence, on our business, results of operation and financial condition.
Argentina has faced and continues to face high inflationary pressures. According to INDEC data, the CPI increased 10.9% in 2010, 9.5% in 2011, 10.8% in 2012, 10.9% in 2013, 23.9% in 2014 and 10.7% in the nine-month period ended September 30, 2015. The IPIM increased 14.6% in 2010, 12.7% in 2011, 13.1% in 2012, 14.8% in 2013, 28.3% in 2014 and 9.6% in the nine-month period ended September 30, 2015.
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On January 8, 2016, Decree No. 55/2016 was issued by the federal government declaring a state of administrative emergency on the national statistical system and on the INDEC, until December 31, 2016. INDEC ceased publishing statistical data until a rearrangement of its technical and administrative structure was finalized. After the process of reorganization, on June 16, 2016, INDEC began releasing official measurements of its primary indication of inflation, the CPI. INDEC reported that the monthly CPI increase in 2016 was 4.2% in May, 3.1% in June, 2.0% in July, 0.2% in August, 1.1% in September, 2.4% in October, 1.6% in November, and 1.2% in December. Further, the monthly CPI increases in 2017 were 1.3% in January, 2.5% in February, 2.4% in March and 2.6% in April. INDEC has also published inflation figures for the IPIM for 2016, reporting monthly increases of 9.0% in January, 5.0% in February, 2.4% in March, 1.5% in April, 3.6% in May, 2.9% in June, 2.7% in July, 0.4% in August, 0.4% in September, 0.6% in October, 1.1% in November and 0.8% in December and increases in 2017 of 1.5% in January, 1.7% in February, 0.9% in March, and 0.5% in April. The IPIM for the year ended December 31, 2016 showed an annual increase of 34.5%. The IPIM for the four-month period ended April 30, 2017 increased by 4.0%.
In the past, inflation has undermined the Argentine economy and the federal government's ability to create conditions conducive to growth. A return to a high inflation rate environment could also negatively affect Argentina's international competitiveness, real wages, employment rates, consumption rate and interest rates. The high level of uncertainty regarding such economic variables, and the general lack of stability in terms of inflation, could lead to reduced contract terms and affect the capability to plan ahead and make decisions. As noted above, this situation may have a negative impact on economic activity, which could materially and adversely affect our business, results of operations and financial condition.
Further, our audited consolidated combined financial statements are not adjusted for inflation as such adjustment is not required under IFRS guidance IAS 29. However, in recent years, certain macroeconomic variables affecting our business, such as the cost of labor, the exchange rate of the Peso to U.S. Dollar and costs of sales associated with inputs necessary to run our business that are denominated in Pesos, have experienced significant annual changes, which, although they may not surpass the levels established in IAS 29, are nevertheless significant. As such, our results of operation and financial statements may not be readily comparable with prior periods. For further information see "Presentation of Financial and Certain Other InformationInflation" and "Market Data and Other Information".
Our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, including between the U.S. Dollar and the Peso.
We conduct a substantial portion of our operations in Argentina, and our businesses may be impacted by significant fluctuations in foreign currency exchange rates. The Peso has been subject to significant devaluation against the U.S. Dollar in the past. The Peso depreciated approximately 14.27% against the U.S. Dollar in 2012, 32.5% in 2013, 31.2% in 2014, 52.07% in 2015 (with the majority of this depreciation occurring following December 16, 2015 as a result of exchange control regulation amendments implemented by the Macri Administration) and 20.37% in 2016, based on official venta de divisas exchange rates reported by the Banco de la Nación Argentina.
Our audited consolidated combined financial statements included elsewhere in this prospectus are presented in Pesos. Therefore, the resulting exchange differences arising from the translation of balances and transactions in U.S. Dollars to Pesos are recognized as a financial gain or expense. As a result, fluctuations in exchange rates relative to the U.S. Dollar could impair the comparability of our results from period to period and could have a material adverse effect on our business, results of operations and financial condition. In addition, our business, results of operations and financial condition are affected by changes in the Peso-to-U.S. Dollar exchange rate because the majority of our operations are conducted in Argentina and, accordingly, a significant portion of our costs are incurred
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in Pesos, while our revenues are primarily influenced by or denominated in U.S. Dollars due to how the price of our food products in Argentina, our largest market, tracks the U.S. Dollar prices of foods. For further information on this relationship, see "Prospectus SummaryKey StrengthsBusiness model naturally hedged to currency fluctuations and prices of agricultural products". Consequently, any appreciation of the U.S. Dollar relative to the Peso, to the extent not offset by inflation affecting our Peso denominated costs in Argentina, could result in favorable variations in our operating margins. Conversely, appreciation of the Peso against the U.S. Dollar may raise our costs in U.S. Dollar terms, which would increase the prices of our manufacturing equipment, products and services to our customers, which, in turn, could adversely affect our business, results of operations and financial condition and cause significant variability in our results of operations from period to period.
Additionally, the devaluation of the Peso has led to very high inflation and significantly reduced real wages. If the Peso is subject to further significantly devaluation, the Argentine economy and our business could be adversely affected. Significant variations in the comparative value of the Peso to the U.S. Dollar could adversely affect our business, results of operations and financial condition.
Government intervention in the Argentine economy could adversely affect our business, results of operations and financial condition.
The federal government exercises substantial control over the Argentine economy and may increase its level of intervention in certain areas of the economy, including through the regulation of market conditions and prices.
In March 2008, the federal government introduced a system of sliding scale tax rates applicable to certain Argentine exports. This system which, according to farmers, established a maximum price for their products, caused general strikes and demonstrations within the agricultural sector, whose exports had driven the country's recovery to a large degree. These protests interrupted economic activity in the country for several months in 2008. Although the federal government subsequently terminated this tax system, the adoption of higher tax rates, or the failure by the federal government to implement measures favorable to the agricultural sector, could lead to new unrest and similar ramifications for the economy in Argentina.
In December 2012 and August 2013, the federal congress established new regulations relating to domestic capital markets. The new regulations generally provide for increased intervention in the capital markets by the federal government, authorizing, for example, the CNV to appoint observers with the ability to veto the board decisions of listed companies under certain circumstances and suspend the board of directors for a period of up to 180 days. On November 17, 2016 the Macri administration submitted a bill to the federal congress to reform the Argentine Capital Markets Law, which would, among other relevant changes, eliminate this authority to appoint observers.
In September 2014, the Fernández de Kirchner administration enacted a law that enables the federal government to intervene in certain markets when it considers that any party to such market is trying to impose prices or supply restrictions in such market. This law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic needs of the population (so-called "basic needs goods"), and grants broad powers to the relevant enforcing agency to become involved in such processes. It also empowers the enforcing agency to order the sale, production, distribution and/or delivery of basic needs goods throughout the country in case of a shortage of supply.
In May 2016, the federal congress barred companies from laying-off workers for a 180-day period, which was later vetoed by President Macri. The law has returned to the federal congress where it would need special majorities to override the veto.
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On June 29, 2016, the federal congress passed a law detailing a "National Program of Historic Reparation for Retirees and Pensioners" which aims, among other purposes, to repay retirees who sued the state over the readjustment of their pensions and to create a "universal old age pension plan" for everyone over 65 years old, even if they have never made contributions or do not qualify for the standard state pension. The new payments would be covered with the funds that the federal government hopes to obtain pursuant to a new tax amnesty and the Guarantee Sustainability Fund of the Argentine Integrated Social Security System (Fondo de Garantía de Sustentibilidad del Sistema Integrado Previsional Argentino, which we refer to as GFS) of the Argentine National Social Security Administration (Administración Nacional de la Seguridad Social, which we will refer as ANSES).
In the future, the level of intervention in the economy by the federal government may continue or increase, the occurrence of which may adversely affect Argentina's economy and, in turn, our business, results of operations and financial condition. There can be no assurance that the federal government will not continue to interfere or increase its intervention by establishing prices or regulating other market conditions. Accordingly, we cannot assure you that we will be able to freely negotiate the prices of the technology used in our operations or products in the future or that the prices or other market conditions that the federal government might impose will allow us to freely price our products, which could have a material adverse effect on our business, results of operations and financial condition.
Expropriation policies could adversely affect our business, results of operations and financial condition.
The federal government has in the recent past (under prior administrations) nationalized companies in various sectors. In November 2008, the Fernández de Kirchner administration nationalized and replaced the former private pension system for a public "pay as you go" pension system. As a result, all resources administered by the private pension funds were transferred to a separate fund administered by the ANSES, including shares of public companies held by the ANSES.
On May 3, 2012, the federal congress expropriated 51% of the share capital of YPF S.A., or YPF, the principal Argentine oil company, whose shares were owned by Repsol S.A. and its affiliates. In February 2014, the federal government announced that it had agreed to pay Repsol S.A. US$5.0 billion in Argentine sovereign bonds as compensation for the seizure of the YPF shares, which although subsequently ratified by Repsol S.A.'s shareholders and the federal congress, represented approximately half of the amount originally demanded by Repsol S.A. On April 23, 2014, the agreement with Repsol S.A. was approved by the federal congress and, accordingly, on May 8, 2014, Repsol S.A. received the Argentine sovereign bonds.
In February 2015, the Fernández de Kirchner administration presented a bill before the federal congress seeking to revoke certain railway concessions, to renationalize the national railway system and to expand the federal government's rights to review all concessions currently in force. The bill was enacted on May 20, 2015.
In addition, on September 23, 2015, the Fernández de Kirchner administration passed Law No. 27,181, which declared the protection of shareholder interests or equity participations held by the federal government as a minority interest to be a matter of public interest, including those shares held within the investment portfolio of the GFS, or when held by the National Ministry of Economy and Public Finance (Ministerio de Hacienda y Finanzas Públicas), currently divided into two ministries, the Ministry of Treasury (Ministerio de Hacienda) and the Ministry of Finance (Ministerio de Finanzas). The federal government is as a result forbidden from transferring those shares or equity interests and/or performing any action that limits, alters or suppresses or changes ownership, or that changes the way in which any returns from those interests are spent unless such change is mandated by a federal congress' two-thirds vote. In addition, the federal government's shares in YPF can never be transferred pursuant to applicable law. In June, 2016, the federal congress began to discuss the repeal of Law No. 27,181, with the aim of, among other matters, removing the restrictions on the disposal of the shares of the
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ANSES' Guarantee Sustainability Fund. The enactment of Law No. 27,260 enabled, under certain particular circumstances, the sale of shares of the ANSES' Guarantee Sustainability Fund for the payment of amounts due to those beneficiaries of the Argentine Integrated Social Security System (SIPA, after its Spanish acronym) who have judicially approved agreements with the ANSES under the Program established by Law No. 27,260. The asset realization shall be reported to the Bicameral Commission for the Control of Social Security Funds.
Expropriation and other interventions by the federal government such as the one related to YPF can have an adverse impact on foreign investments in Argentina, the access of Argentine companies to the international capital markets and relations between Argentina and other countries, the occurrence of which could adversely affect our business, results of operations and financial condition.
The credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of this offering and/or the market value of our Class B ordinary shares and the ADSs.
Since 2007, the INDEC, which is the only institution in Argentina with the statutory authority to produce official national statistics, has experienced a process of institutional and methodological reforms that have given rise to controversy regarding the reliability of the information that it produces, including inflation, GDP and unemployment data. Reports published by the International Monetary Fund, or IMF, stated that their staff used alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which showed inflation rates considerably higher than those published by INDEC since 2007. The IMF also censured Argentina for failing to make sufficient progress, as required under the Articles of Agreement of the IMF, in adopting remedial measures to address the quality of official data, including inflation and GDP data. On January 7, 2016, the Macri administration declared a state of administrative emergency in respect of the national statistical system and on the INDEC, until December 31, 2016. Since the declared state of emergency, the INDEC has ceased publishing certain statistical data and has only resumed publication of the CPI on June 16, 2016. On June 29, 2016, INDEC also published revised GDP data for the years 2004 through 2015. In July and October 2016, an IMF team met officers of INDEC and the finance ministry regarding the federal government's new inflation and gross domestic product statistics. Following the meeting, on November 9, 2016, the Executive Directors of the IMF lifted the motion of censure, enabling Argentina to borrow from the IMF again.
Notwithstanding the federal government's new inflation and gross domestic product statistics, we cannot assure you that that the federal government may not vary or introduce any other measures that may affect the national statistics system, which could have a material adverse effect on our business, results of operations and financial condition.
Argentina's ability to obtain financing from international markets may be limited, which may in turn impair its ability to implement reforms and public policies and foster economic growth.
Argentina's 2001 sovereign default and its failure to fully restructure its sovereign debt and negotiate with the holdout creditors has limited and may continue to limit Argentina's ability to access international financing. In 2005, Argentina completed the restructuring of a substantial portion of its indebtedness and settled all of its debt with the IMF. Additionally, in June 2010, Argentina completed the restructuring of a significant portion of the defaulted bonds that were not exchanged in the 2005 restructuring. As a result of the debt exchanges carried out in 2005 and 2010, Argentina restructured approximately 93% of its defaulted debt that was eligible for restructuring. However, holdout bondholders that declined to participate in the restructuring, filed lawsuits against Argentina in several countries, including the United States. Since late 2012, rulings from courts in the United States favorable to holdout bondholders aggravated investors' concerns regarding investment in the country.
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On November, 2012, the United States District Court for the Southern District of New York in re: "NML Capital, Ltd. v. Republic of Argentina", ratified and amended the injunction order issued on February, 2012, which held that Argentina violated the pari passu clause with respect to the bondholders that had not participated in the sovereign debt restructuring in 2005 and 2010. Pursuant to such ruling, Argentina was required to pay 100% of the amounts due to the plaintiffs, simultaneously with the payment of the amounts due on the next maturity date of the bonds to the bondholders who participated in the debt restructuring. In June 2014, the U.S. Supreme Court denied Argentina's petition for a writ of certiorari of the U.S. Second Circuit Court of Appeals' ruling affirming the U.S. District Court's judgment. Later that month, the U.S. District Court ruled that funds deposited with The Bank of New York Mellon, the trustee which manages bond payments for Argentina's bonds issued in the 2005 and 2010 debt restructuring, should not be delivered to the holders of restructured debt in the absence of a prior agreement with the holdout bondholders (the plaintiffs in this case). In June 2015, the U.S. District Court granted partial summary judgment to a group of "me-too" plaintiffs in 36 separate lawsuits, finding that, consistent with the previous ruling of such court, Argentina violated the pari passu clause in the bonds issued to the "me-too" bondholders.
In February 2016, the new Argentine administration entered into settlement agreements with certain holdout bondholders to settle these claims, which were subject to the approval of the federal congress and the lifting of the pari passu injunctions. In March 2016, after the U.S. District Court agreed to vacate the pari passu injunctions subject to certain conditions, the federal government ratified these settlement agreements through Law No. 27,249 and repealed the provisions of the so-called Lock Law No. 26,017 and the Sovereign Payment Law No. 26,984, which prohibited Argentina from offering holdout bondholders more favorable terms than those offered in the 2005 and 2010 debt restructuring. In subsequent months, the federal government reached settlement agreements with holders of a significant portion of the defaulted bonds and has repaid the majority of the holdout creditors with the proceeds of a US$16.5 billion international offering of 3-year, 5-year, 10-year and 30-year bonds on April 22, 2016. Although the size of the claims involved has decreased significantly, litigation initiated by bondholders that have not accepted Argentina's settlement offer continues in several jurisdictions.
Additionally, foreign shareholders of several Argentine companies have filed claims with the International Centre for Settlement of Investment Disputes, or the ICSID, alleging that the emergency measures adopted by the federal government since the crisis in 2001 and 2002 differ from the just and equal treatment standards set forth in several bilateral investment treaties to which Argentina is a party. The ICSID has ruled against Argentina with respect to many of these claims.
Litigation involving holdout creditors, claims with the ICSID and other claims against the federal government resulted and may result in material judgments against the government, lead to attachments of, or injunctions relating to, Argentina's assets, or could cause Argentina to default under its other obligations, and such events may prevent Argentina from obtaining favorable terms or interest rates when accessing international capital markets or from accessing international financing at all. Our ability to obtain U.S. dollar-denominated financing has been adversely impacted by these factors. During 2014, 2015 and 2016, it became increasingly difficult to obtain financing in U.S. dollars, and loans in local currencies carried significantly higher interest rates. The termination of the injunctions issued by the United States courts preventing bondholders from receiving their interest payments on the bonds issued pursuant to the 2005 and 2010 exchange offers, and the related subsequent events, have paved the way for the federal government to regain access to the international capital markets. Nonetheless, Argentina's ability to obtain international or multilateral private financing or direct foreign investment may be limited, which may in turn impair its ability to implement reforms and public policies to foster economic growth. In addition, Argentina's ongoing litigation with the remaining holdout creditors as well as ICSID and other claims against the federal government, or any future defaults of its financial obligations, may prevent Argentine companies, such as us, from accessing the international capital
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markets or cause the terms of any such transactions less favorable than those provided to companies in other countries in the region, potentially impacting our financial condition.
An increase in export and import duties and controls may have an adverse impact on our business.
Since 2002, the federal government has imposed duties on the exports of various primary and manufactured products. During the last ten years, such export taxes have undergone significant increases, reaching a maximum of 23% in the case of wheat and 35% in the case of soybean. We cannot assure you that there will not be further increases in the export taxes or that other new export taxes or quotas will not be imposed. Pursuant to a resolution of the Exchange Transactions Consultation Program of the Administración Federal de Ingresos Públicos, which we refer to as AFIP, since February 2012, prior to the execution of any purchase order or similar document, Argentine importers were required to file an Affidavit for Expected Imports (Declaración Jurada Anticipada de Importación), which we refer to as DJAI, before the AFIP, providing information on future imports. Compliance with this requirement was verified by the Argentine Customs (Dirección General de Aduanas) upon arrival of the goods into Argentina and was a condition for the authorization of the payment of the purchase price by Argentine financial entities. Even though this was intended merely as an informational regime, it was used for purposes of restricting imports into Argentina and caused significant delays. A similar regime was also imposed for the import and export of services, which resulted in additional restrictions being imposed on the payments made by Argentine residents on services provided by foreign residents.
The Macri administration eased several export and import duties and controls. In particular, the federal government eliminated export duties on wheat, corn, beef, mining and regional products, and reduced the duty on soybean exports by 5%, from 35% to 30%. Further, a 5% export duty on most industrial exports was eliminated. With respect to payments for imports and services, the Macri administration announced the gradual elimination of amount limitations for access to the Mercado Único y Libre de Cambios, which we refer to as the Foreign Exchange Market, for any transactions originated before December 17, 2015. Pursuant to Communiqué "A" 5955, the amount limitations were eliminated on April 22, 2016. With respect to the transactions executed after December 17, 2015, no amount limitation will be applicable. Furthermore, the Macri administration announced the replacement of the DJAI with a new import procedure that requires certain filings and import licenses for certain goods (including textiles, footwear, toys, domestic appliances and automobile parts), which, unlike the previous system, does not require discretionary federal government approval of payments for the import of products through the Foreign Exchange Market. Though not required in order to make payments, such discretionary approval is still a requirement for obtaining the custom clearance and entrance registration of products imported into Argentina.
On January 2, 2017 the federal government enacted a further reduction of the export duties rate set for soybean and soybean products, setting a monthly 0.5% cut on the export duties rate beginning on January 2018 and through December 2019. Likewise, on December 30, 2016, Decree No. 1341/2016 was issued by the federal government, establishing an increase between 0.5% and 9.5% in the level of the export refunds for several agricultural products. For instance, the refund corresponding to wheat flour was set at 4% for those shipments that are exported in packages that do not exceed two kilograms, and 3% for shipments that exceed such amount. This decree also establishes an additional increase of 0.5% in the refund for the following specific scenarios: i) if the exported products hold the status of ecological, biological or organic pursuant to Argentine law; ii) if the exported products are authorized to hold the "Argentine Food A Natural Choice" seal pursuant to Argentine Law; or iii) if the exported products count with a Geographical Indication which is duly registered before the Value Added Secretary of the Argentine Ministry of Agroindustry.
The impact of these measures taken by the Macri administration is still uncertain. The imposition of the prior or any other similar regime may restrict the imports of goods and the import and export of
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services, which may adversely affect our business, results of operations and financial condition. The imposition of new or additional export taxes or quotas or a significant increase in existing export taxes or the application of export quotas could adversely affect our business, results of operations and financial condition.
The potential implementation in the future of new exchange controls, restrictions on transfers abroad and capital inflow restrictions could limit the availability of international credit and could threaten the financial system, which may adversely affect the Argentine economy and, as a result, our business.
Argentina has in the recent past imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. Further, the federal government has also adopted various rules and regulations that established restrictive controls on capital inflows into Argentina, including a requirement that, for certain funds remitted into Argentina, an amount equal to 30.0% of the funds must be deposited into an account with a local financial institution as a U.S. Dollar deposit for a one-year period without any accrual of interest, benefit or other use as collateral for any transaction.
During the Fernández de Kirchner administration, through a combination of foreign exchange and tax regulations, the Argentine authorities significantly curtailed access to the foreign exchange market by individuals and private-sector entities. Furthermore, during the last few years under the Fernández de Kirchner administration, the Central Bank has exercised a de facto prior approval power for certain foreign exchange transactions otherwise authorized to be carried out under the applicable regulations, such as dividend payments or repayment of principal of inter-company loans as well as the import of goods.
The number of exchange controls introduced in the past and in particular after 2011 during the Fernández de Kirchner administration gave rise to an unofficial U.S. Dollar trading market, and the Peso/U.S. Dollar exchange rate in that market substantially differed from the official Peso/U.S. Dollar exchange rate. For further information on the legislation and terms relating to exchange controls, see "Exchange Rates and Exchange Controls".
Since assuming office, the Macri administration has announced various reforms to the foreign exchange regulations that are expected to provide greater flexibility and easier access to the foreign exchange market. The principal measures adopted as of the date of this prospectus include:
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On December 17, 2015, because certain restrictions were lifted, the Peso devalued against the U.S. Dollar. See "Our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, including between the U.S. Dollar and the Peso" and "Exchange Rates and Exchange Controls".
Notwithstanding the measures recently adopted by the Macri administration, in the future the federal government could otherwise reinstate or impose further exchange controls, transfer restrictions, required repatriation through the Foreign Exchange Market of proceeds raised through capital markets transactions conducted abroad or restrictions on the movement of capital and/or take other measures in response to capital flight or a significant depreciation of the Peso, which could limit our ability to access the international capital markets and/or make dividend payments to holders of the ADSs, which may adversely affect the value of our ADSs. Such measures could lead to political and social tensions and undermine the federal government's public finances, as it has occurred in the past, which could adversely affect Argentina's economy and prospects for economic growth, which, in turn, could adversely affect our business, results of operations and financial condition and the market value of our shares and the ADSs.
The federal government may lack adequate international reserves, which may limit its ability to intervene in the foreign exchange markets if necessary and to provide access to such markets to private companies such as us.
The level of international reserves deposited with the Central Bank significantly decreased from US$47.4 billion as of November 1, 2011 to US$25.6 billion as of December 31, 2015, resulting in a reduced capacity of the federal government to intervene in the foreign exchange market as necessary and to provide access to such markets to private sector entities like us. The Macri administration recently announced a program intended to increase the level of international reserves deposited with the Central Bank through the execution of certain agreements with several foreign entities. As a result of the measures taken under this program, the international reserves increased to US$46.8 billion as of January, 2017.
The federal government may order salary increases for employees in the private sector, which could increase our operating costs and adversely affect our results of operations.
In the past, the federal government has passed laws, regulations and decrees requiring companies in the private sector to increase wages and provide specified benefits to employees and may do so again in the future. Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, employees and labor organizations are demanding significant wage increases. Labor relations in Argentina are governed by specific legislation, which, among other things, dictate how salary and other labor negotiations are to be conducted. Every industrial or commercial activity is regulated by a specific collective bargaining agreement that groups together companies according to business sectors and trade unions. While the process of negotiation is standardized, each chamber of commerce group for a particular industrial or commercial activity negotiates any increase in salaries or labor benefits with the relevant trade union of such commercial or industrial activity. Due to high levels of inflation, employers in both the public and private sectors have historically experienced, and are experiencing, significant pressure from unions and their employees to further increase salaries. During 2015, various unions negotiated agreements with employers'
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associations to implement salary increases of over 25%. During 2016, various unions negotiated agreements with employers' associations to implement salary increases of over 30%. We also experienced wage increases in connection with our various collective bargaining agreements. In 2015, the INDEC published the Coeficiente de Variación Salarial (Salary Variation Index, or for the abbreviation taken from its Spanish name, CVS), an index that shows the evolution of salaries. The CVS showed an increase of approximately 30% in registered private sector salaries for the year ended 2015. In 2016, the CVS showed an increase of 32.9%. In the future, the federal government could take new measures requiring salary increases or additional benefits for workers, and the labor force and labor unions may apply pressure for such measures. If, as a result of such measures, future salary increases exceed the pace of the devaluation of the Peso, this could have a material adverse effect on our costs and business, results of operations and financial condition.
Government measures to preempt or respond to social unrest may adversely affect the Argentine economy and our business.
During the Argentine economic crisis in 2001 and 2002, Argentina experienced significant social and political turmoil, including civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentina's economic recovery and relative stabilization, social and political tension and high levels of poverty and unemployment continue. In 2008, Argentina faced nationwide strikes and protests from farmers due to increased export taxes on agricultural products, which disrupted economic activity and heightened political tensions. On November 8, 2012, there was a widespread protest against the federal government and strikes, and social unrest increased during the last months of 2012. Social unrest continued to increase during 2013, 2014 and the beginning of 2015, which was reflected by general strikes on April 10, 2014 and March 30, 2015. Future possible federal government policies to preempt, or respond to, social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors' rights, new taxation policies, including royalty and tax increases and retroactive tax claims, and changes in laws and policies affecting foreign trade and investment. Any such policies could destabilize the country and adversely and materially affect the Argentine economy, and thereby our business, results of operations and financial condition.
The stability of the Argentine banking system is uncertain.
During 2001 and the first half of 2002, a significant amount of deposits were withdrawn from Argentine financial institutions. This massive withdrawal of deposits was largely due to the loss of confidence of depositors in the federal government's ability to repay its debts, including its debts within the financial system, and to maintain Peso-Dollar parity in the context of its solvency crisis. To prevent a run on the U.S. Dollar reserves of local banks, the federal government restricted the amount of money that account holders could withdraw from banks and introduced exchange controls restricting capital outflows. While the condition of the financial system has improved, adverse economic developments, even if not related to or attributable to the financial system, could result in deposits flowing out of the banks and into the foreign exchange market, as depositors seek to shield their financial assets from a new crisis. Any run on deposits could create liquidity or even solvency problems for financial institutions, resulting in a contraction of available credit.
In the event of a future shock, such as the failure of one or more banks or a crisis in depositor confidence, the federal government could impose further exchange controls or transfer restrictions and take other measures that could lead to renewed political and social tensions and undermine the federal government's public finances, which could adversely affect Argentina's economy and prospects for economic growth.
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Increased public expenditures may have long-lasting adverse consequences on the Argentine economy.
During its last final years in power, the Fernández de Kirchner administration substantially increased public expenditures. During recent years, the Fernandez de Kirchner administration relied on the Central Bank's reserves and the ANSES to source part of its funding requirements. The federal government announced that the primary fiscal deficit in 2015 was 5.4% of the GDP.
In light of increasingly constrained public finances, the Fernández de Kirchner administration adopted certain measures to finance public expenditures such as revising and downsizing its subsidy policies (particularly, those related to energy, electricity and gas, water and public transportation) and implementing expansionary monetary policies. These policies have led to high inflation and, therefore, adversely affected, and could further affect, consumer purchasing power and economic activity.
The Macri administration announced its intention to solidify the country's fiscal accounts (accounts of the Argentine tax authorities) and public accounts (accounts of the federal government) in order to reduce the primary budget deficit through a series of tax and other measures, pursued a primary fiscal deficit target of 4.8% of GDP in 2016 and will pursue a 4.2% primary fiscal deficit target of GDP in 2017, in part by the elimination of subsidies and the reorganization of certain expenditures. According to the most recent information reported by the Ministry of Finance (Ministerio de Finanzas), the primary fiscal deficit in 2016 was 4.6% of GDP. As of the date of this prospectus, although the Macri administration is currently reviewing certain public sector contracts, there is uncertainty as to what additional actions, if any, the Macri administration will take with respect to public expenditure and its financing.
The federal government has begun to implement measures to solve the ongoing energy sector crisis in Argentina, but the eventual outcome of such measures is unknown.
Government policies from 2001 through 2015 caused production of oil and gas and electricity generation, transmission and distribution to stagnate while consumption continued to rise. In an attempt to address energy shortages, starting in 2011 the federal government increased imports of energy, resulting in adverse implications for the trade balance and the international reserves of the Central Bank.
In response to the growing energy crisis, on December 17, 2015, the Macri administration declared a state of emergency with respect to the national electricity system, which will be in effect until December 31, 2017. The state of emergency allows the federal government to take actions designed to stabilize the supply of electricity to the country, such as instructing the Federal Ministry of Energy and Mining (Ministerio de Energía y Minería) to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electricity system. In addition, the Macri administration announced the elimination of certain energy subsidies currently in effect and significant adjustments to electricity rates to reflect generation costs. Additionally, the Macri administration announced the elimination of some natural gas subsidies and adjustment to natural gas rates.
Certain provincial governments, municipalities, hospitals, companies and residents, among others, have filed claims with the Federal Ministry of Energy and Mining and with competent courts against the new electricity and gas tariffs, arguing, in general, that the increased tariffs are arbitrary, illegal and/or unconstitutional. In some cases, courts hearing the cases have favored claimants' demands and ordered public service providers to suspend the application of the new tariffs. Among the various rulings, two separate rulings led to the suspension of end-user tariff increases of electricity in the Province of Buenos Aires and the rest of Argentina. However, on September 6, 2016, the highest court of law of the Argentine Republic, the Nation's Supreme Court of Justice (Corte Suprema de Justicia de la Nación or the Supreme Court of Argentina), denied these injunctions that suspended end-users electricity tariff increases. Therefore, as of the date hereof, increases to the electricity end-users tariffs
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are in effect. On September 12, 2016, pursuant to a Supreme Court of Argentina decision, an open hearing lead by the Minister of Energy and Mining, Juan José Aranguren, was held in relation to the approval of a gas tariff schedule. In October 2016, such a new gas tariff schedule was approved by the Macri administration with increases in the tariff ranging between 300% and 500%. On October 28, 2016, a non-binding public hearing was conducted by the Ministry of Energy and Mining and the National Electricity Regulating Agency (the Ente Nacional Regulador de la Electricidad or ENRE) to present tariff proposals submitted by distribution companies covering the greater Buenos Aires area (with approximately 15 million inhabitants) for the 2017-2021 period in the framework of an integral tariff review. On February 1, 2017, the ENRE enacted several resolutions which, among other policy changes, implement a reduction of electricity subsidies for electricity distributors Empresa Distribuidora y Comercializadora Norte S.A. and Empresa Distribuidora Sur S.A., and an increase in electricity tariffs for residential users of said companies. The amount of the increase ranges between 61% and 148%, depending on the amount of electricity consumption. The ensuing increase in electricity tariffs may adversely affect the acquisition power of consumers, which may have an adverse effect on our financial condition and results of operation. In addition, there have been recent increases in electricity tariffs that target commercial establishments and factories. In 2017, the announced increase for small and medium-sized businesses would be 30% in February and 18% in March. The increase was announced pursuant to Resolution 20/2017 of the Office of Electric Energy. In addition to these electricity tariff increases, on March 30, 2017, the Minister of Energy and Mining announced that gas tariffs for commercial and residential use in the City of Buenos Aires and the Greater Buenos Aires Area will increase by 20% to 36%. In light of these recent increases, we cannot assure you that the Federal Government will not undertake further increases in electricity tariffs. Should these increases occur, we cannot assure you that they will not result in significant increases in our production costs, which will have an adverse effect on our business, results of operation and financial condition.
A decline in international prices for Argentina's main commodity exports could have an adverse effect on Argentina's economic growth.
Reliance on the export of certain commodities has caused the Argentine economy to be vulnerable to fluctuations in commodity prices. Since the beginning of 2015, international commodity prices for Argentina's primary commodity exports have declined, which has had an adverse effect on Argentina's economic growth. A further decline in the international prices for Argentina's main commodity exports could have a negative impact on the levels of federal government revenues and the federal government's ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the federal government's reaction. Either of these results would adversely impact Argentina's economy and, therefore, our business, results of operations and financial condition.
The Argentine economy can be adversely affected by economic developments in other markets and by more general "contagion" effects, which could have a material adverse effect on Argentina's economic growth.
Argentina's economy is vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina's major trading partners (including Brazil, which is currently undergoing a recession, the European Union, China and the United States) could have a material adverse impact on Argentina's balance of trade and adversely affect Argentina's economic growth. In 2015, there were declines in exports to Chile, Brazil, the United States and Canada (collectively) of approximately 14%, 27% and 18%, respectively, in each case as compared to 2014. Declining demand for Argentine exports could have a material adverse effect on Argentina's economic growth.
In addition, financial and securities markets in Argentina have been influenced by economic and market conditions in other markets worldwide. Although economic conditions vary from country to country, investors' perceptions of events occurring in other countries have in the past substantially
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affected, and may continue to substantially affect, capital flows into, and investments in securities from issuers in, other countries, including Argentina. International investors' reactions to events occurring in one market sometimes demonstrate a "contagion" effect in which an entire region or class of investment is disfavored by international investors, Argentina could be adversely affected by negative economic or financial developments in other countries, which in turn may have an adverse effect on our business, results of operations and financial condition.
For example, the outcome of the 2016 presidential election in the United States has augmented market volatility due to uncertainty related to changes in U.S. foreign and economic policy, which could affect Latin America companies' access to international capital markets and may affect our ability to incur or refinance debt necessary to fund our operations. Adverse geopolitical events or economic conditions in the United States, the termination or re-negotiation of the North American Free Trade Agreement (NAFTA), other free trade agreements or other related events could have an adverse effect on the Argentine economy or on the global economy as a whole. We cannot assure you that events in other emerging market countries, in the United States or elsewhere will not adversely affect our business, results of operations and financial condition.
Risks Related to Latin America
We are exposed to risks of operating in, and selling products in, multiple countries in Latin America.
We operate in various countries in South America, predominantly in Argentina and Uruguay and with presence in Brazil, Bolivia and Chile; we sell our products to other countries in the region and our strategy is to intersperse our operations in Latin America. As a result, our business is subject to risks resulting from differing legal, political, social and regulatory requirements, economic conditions and unforeseeable developments in these markets, all or any of which could result in disruption of our activities. These risks include, among others:
Our overall success within the markets in which we operate depends, to a considerable extent, on our ability to effectively manage differing legal, political, social and regulatory requirements, economic conditions and unforeseeable developments. We cannot guarantee that we will succeed in developing and implementing policies and strategies which will be effective in each location where we do business.
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We must comply with complex and evolving tax regulations in the various jurisdictions in which we operate, which subjects us to international tax compliance risks. Some tax jurisdictions in which we operate have complex and subjective rules regarding income tax, value-added tax, sales or excise tax and transfer tax. From time to time, our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations of our goods and services which could be material and could reduce our income and cash flow from our international subsidiaries. We cannot assure you that any governmental authority in the countries in which we operate or sell our products, especially in Argentina, Uruguay, Brazil, Chile and Bolivia, will not increase taxes or impose new taxes on our products in the future.
In Argentina, commodities exporters may use related trading companies abroad to commercialize their products. Based on specific rules of the Argentine Income Tax Law No. 27, 346 (as amended), or Income Tax Law, the AFIP has challenged in the past and regularly investigates the transfer pricing of these transactions for most of the companies in this sector. The amounts claimed by AFIP may be significant. We have in the past been subject to investigations by the AFIP. Those investigations, however, have not resulted in material actions, decisions, requirements or sanctions. We are currently not aware of any investigation into breaches of existing tax laws or regulations applicable to our business or operations that could result in such actions, decisions, requirements or sanctions. Nevertheless, we cannot assure you that disputes with the AFIP or any other tax authority may not arise in the future, which may have an adverse effect on our business, results of operations and financial condition. Further, tax determination over certain amounts may result in the filing of criminal charges for evasion against the members of our Board of Directors. As such, we cannot assure you that we may not be subject to transfer pricing claims which may have an adverse effect on our results of operation.
Our business is tied to macroeconomic conditions in the countries in which we operate, and such conditions significantly affect our business, results of operations and financial condition.
The performance of our business is tied to macroeconomic conditions in the countries in which we operate or sell our products, the majority of which are emerging economies. As emerging economies, these countries have in the past and may in the future experience negative economic trends related to high inflation, exchange-rate volatility and high unemployment, among others. These countries have also been subject to periods of political instability, intense government intervention and, in some cases, violence.
Because we have no control over macroeconomic events or government policies, we cannot predict how the governments of the countries in which we operate will react to the prevalence of any adverse conditions in the future or how these events would affect, directly and indirectly, our business, results of operations and financial condition.
The success of our business is dependent on economic activity indicators, real wage levels, interest rates and employment conditions, which are influenced by general macroeconomic conditions. Any prolonged economic downturn could result in a decline in real wage levels and result in increased unemployment. This may lead to a decrease in the number of employee contributors or a lack of capacity for creating new jobs, or decrease the salary of workers, each of which are variables that determine the aggregate salary base. Consumer behavior could include policy cancellations, modifications, non-renewals or debt defaults, which may reduce cash flow from operations and investments and may harm our financial position. Further, an increase in the unemployment rate could adversely affect our results of operations and, depending on its magnitude, the impact could be significant.
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Changes in governmental policies in the countries in which we operate could adversely affect our business, results of operations and financial condition.
Governments in the countries in which we operate have exercised, and continue to exercise, significant influence over the economies of their respective countries. Accordingly, the governmental actions, political developments, regulatory, fiscal, foreign exchange, tax and legal changes or administrative practices in the countries in which we operate concerning the economy could have a significant impact on us. Changes in the governmental policies in the countries in which we operate could adversely affect our business, results of operations and financial condition.
Our business, results of operations and financial condition could also be adversely affected by changes in the economic policies, growth, stability, outlook or regulatory environment. For example, elections in certain countries in Latin America where our business operates can result in successor administrations pursuing significant changes in the countries' economic policies and regulations, including tax increases, higher minimum wages and additional employee pension requirements, stricter environmental standards, greater rights to protect consumers or other populations and more proactive or interventionist government policies in certain sectors of the economy that have been underserved by the private sector. Such policies, if implemented, could adversely affect the economies of the countries in which we operate and, as a result, our business, results of operations and financial condition.
Inflation and government measures to curb inflation could adversely affect the economies in the countries in which we operate.
Some of the countries in which we operate have experienced, or are currently experiencing, high rates of inflation. For example, for the year ended December 31, 2016, Brazil's official inflation rate was 6.29%, according to the official data released by the Brazilian Institute of Geography and Statistics. Uruguay's inflation rate was 8.7%, for the year ended December 31, 2015, according to the data released by World Bank. Although inflation rates in many of these countries have been relatively low in the recent past, this trend may not continue. The measures taken by the governments of these countries to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and retarding economic growth. Inflation, measures to combat inflation and public speculation about possible additional actions have also contributed materially to economic uncertainty in many of these countries and to heightened volatility in their securities markets. Periods of higher inflation may also slow the growth rate of local economies, which could lead to reduced demand for our consumer Retail Products in those local economies and decreased sales. Inflation is also likely to increase some costs and expenses of our business in those local economies, which we may not be able to fully pass on to our customers, which could adversely affect our operating margins and operating income.
Currency devaluations and exchange rate fluctuations against the currencies in the countries in which we operate or sell our products could adversely affect our business, results of operations and financial condition.
We are exposed to exchange rate risk in relation to the U.S. Dollar. Although substantially all of our income is denominated in the local currencies of the countries in which we operate, 96.4% of our outstanding long-term debt was denominated in U.S. Dollar as of November 30, 2016. The local currencies of the countries in which we operate or sell our products have been subject to volatility in the past and could be subject to significant fluctuations in the future given the prevalence of a free-float exchange regime, such as the depreciation of the Brazilian real and high rates of inflation. Unforeseen events in the international markets, fluctuations in interest rates, volatility of the oil price in the international markets, or changes in capital flows, may cause exchange rate instability that could generate sharp movements in the value of the local currencies of the countries in which we operate. The main drivers of exchange rate volatility in past years have been significant fluctuations of commodity prices as well as general uncertainty and trade imbalances in the global markets. In the
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past, certain countries in which our business operate, have instituted restrictive exchange control policies. Severe devaluation or depreciation of the currencies of the countries in which we operate could again result in governmental intervention or disruption of foreign exchange markets.
Any fluctuation in the value of the U.S. Dollar with respect to the various currencies of the countries in which we operate could adversely affect our business, results of operations and financial condition and a significant decrease in the value of the local currencies of the countries in which we operate as compared to the U.S. Dollar will increase our debt service costs.
Risks Related to Uruguay
Our business is subject to risks of operation in Uruguay.
Uruguay is an emerging market economy. Emerging markets are generally more vulnerable to market volatility, as well as political and economic instability, than developed markets. As such, investments in a company such as ours, with operations in an emerging market such as Uruguay, are subject to certain risks which may affect economic and fiscal results. These risks include:
Any of these factors may adversely affect economic conditions in Uruguay and, as a result, our business, results of operations and financial condition.
Uruguay's economy is vulnerable to external shocks and to adverse developments affecting its major trading partners or by more general "contagion" effects, which could have a material adverse effect on economic growth and its ability to rely on the international capital markets as a source of financing.
In addition, because reactions of "international investors" to events occurring in one market, particularly emerging markets, frequently appear to demonstrate a "contagion" effect, in which an entire region or class of investment is disfavored by international investors, Uruguay could be adversely affected by negative economic or financial developments in other markets. Furthermore, the ongoing instability affecting the European financial markets could adversely affect investors' confidence in other markets, such as Uruguay.
There can be no assurance that external shocks and uncertainties affecting members of the European Union or similar events will not negatively affect investor confidence in emerging markets or the economies of the principal countries in Latin America. These events, as well as economic and political developments affecting the economies of Uruguay's principal trading partners, may adversely affect Uruguay's ability to raise capital in the external debt markets in the future, as well as its economic condition.
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Risks Related to Brazil
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy.
Our net sales from Brazil accounted for less than 3.3% for the fiscal year ended November 30, 2016. However, we intend to increase our operations in the country in the future.
The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policies and regulations. The Brazilian government's actions to control inflation and other policies and regulations have often involved, among other measures, variations in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, results of operations, financial condition, future business, as well as the market price of our securities, may be adversely affected by changes in policies or regulations involving or affecting factors such as:
Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and in the securities issued abroad by Brazilian issuers. The impeachment proceedings in Brazil in which President Dilma Rousseff was found guilty of breaching federal budget laws during her re-election campaign in 2014, currency devaluations and the continuing impact of Brazil's recent economic recession all contribute to Brazil's instability. Therefore, these uncertainties and developments in the Brazilian economy may have an adverse effect on our business, results of operations and financial condition in such a country.
Risks Related to Our Business
Because we do not grow the agricultural products that supply our business segments, we are completely dependent on our network of farmers, and our results of operations may be negatively affected if we are unable to maintain an adequate network of farmers to supply our need for agricultural food products such as wheat, soybean and other agricultural products.
We do not grow any of the wheat, sunflower, soybean, corn, barley, sorghum or other crops that we sell or use in our production of branded industrial products such as industrial flour or vegetable oil. As a result, we are entirely dependent upon our network of farmers to supply us with the agricultural products we require. We rely on a network of more than 8,000 farmers to which we sell farming products and services in exchange for the agricultural products necessary for our business. In addition,
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our purchases of wheat, sunflower, soybean, corn, barley, sorghum and other agricultural products are not conducted under long-term contracts, which makes us particularly vulnerable to market-driven factors beyond our control as well as competitors from other companies seeking to source the same agricultural products. Events such as a decrease in supply caused by an increase in the value of other commodity crops that we do not consume, an increase in land prices, unexpected competition, reduced water availability or other natural or ecological problems beyond our control could disrupt our supply chain. Similarly, if our network of farmers becomes otherwise unhappy with the farming products, and services we provide or the manner in which we provide these goods and services, we may face a similar shortage in supply. Any of these disruptions could limit the supply of agricultural products that we obtain in any given year, thereby affecting our ability to source the raw materials we need for the production of our products. Such disruption could also damage our customer relationships and loyalty if we cannot supply the amount of wheat, sunflower, soybean, corn, barley, and sorghum that they require. Although our network of farmers is diversified and no farmer supplies a material proportion of our total agricultural products needed for the production of our products, it is not without risks. Adverse agronomic, ecological, climatic or other factors could lead to a decrease in the supply of the agricultural products we require for the production of branded industrial products and retail products which could negatively impact our business, results of operations and financial condition.
Our inability to carry out our growth strategy could adversely affect our business, results of operations and financial condition.
Our growth strategy is based on the development of new products in our existing business lines and on the expansion into new businesses and regional opportunities. Our plan to grow through regional expansion, the development of new products or the development of new business categories could be adversely affected by trends in branded industrial products and retail products in Argentina and the other markets in which we operate. Our ability to introduce new products is contingent on our accurate judgment of potential consumer preferences, and our continued diversification into new product categories relies on our ability to initially identify the creative opportunities within which we can add value. If we are unable to carry out our strategy, our business, results of operations and financial condition could be adversely affected. Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including operating and leasing expectations.
The retail and branded industrial product categories in which we participate are very competitive, and if we are not able to compete effectively, our results of operations could be adversely affected.
The retail and branded industrial product categories in which we participate through our Retail Products and Branded Industrial Products segments are very competitive. Our principal competitors in these categories have substantial financial, marketing, and other resources. In most product categories, we compete not only with other widely advertised retail products, but also with regional brands and with generic and private label products that are generally sold at lower prices. Competition in our retail products categories is based on product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, health benefits, the ability to identify and satisfy consumer preferences, and innovation. Similarly competition in our branded industrial products is based on price, loyalty of our business customers, product quality and reliability for use in retail and other food production. If our large competitors were to seek an advantage through pricing or promotional changes, we could choose to do the same, which could adversely affect our margins and profitability. If we did not do the same, our revenues and market share could be adversely affected. Our market share and revenue growth could also be adversely impacted if we are not successful in introducing innovative products in response to changing consumer demands or by new product introductions of our competitors. If we are unable to build and sustain brand equity by offering recognizably superior product quality, we may be unable to maintain premium pricing over generic and private label products.
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Price controls in certain countries in which we operate have affected and may continue to affect our results of operations.
Certain countries in which we conduct operations, including Argentina, have in the past imposed price controls that restrict our ability to adjust the prices of our retail products. This places downward pressure on the prices at which our products are sold and may limit the growth of our revenue. Price controls in Argentina are applied to retail products intended for final consumption under the Precios Cuidados regime. In Argentina, as of the date of this prospectus, eight products from our Retail Products segment are subject to price controls including four different types of Paseo mini crackers, two different types of dry noodles, Mamá Cocina bread crumbs and Cañuelas wheat flour. As such, we cannot assure you that the negative effects of the previously imposed price controls will not continue into the future, or that new controls will not be imposed. These controls are not applicable to our branded industrial products, or to products in our sustainable sourcing business line.
Our inability to control the prices of our products could have an adverse effect on our business, results of operations and financial condition.
New regulations or regulatory actions could adversely affect our business.
Our facilities and food products are subject to many laws and regulations administered by federal, provincial, local and other governmental agencies from Argentina and other countries in which we operate relating to the production, packaging, labeling, storage, distribution, quality, safety of food products and the health and safety of our employees. Our failure to comply with such laws and regulations could subject us to lawsuits, administrative penalties and civil remedies, including fines, injunctions, and recalls of our products. We advertise our retail products and could be the target of claims relating to alleged false or deceptive advertising under Argentine federal, provincial, and other laws and regulations of countries in which we operate or sell our products. We may also be subject to new laws or regulations restricting our right to advertise our products, including proposals to limit advertising to children. Changes in laws or regulations that impose additional regulatory requirements on us could increase our cost of doing business or restrict our actions, causing our results of operations to be adversely affected.
We are also subject to various federal, provincial, local and other environmental laws and regulations agencies from Argentina and other countries in which we operate. Our failure to comply with environmental laws and regulations could subject us to civil, criminal and administrative penalties, including environmental remediation and compensation or damages resulting from the violation of environmental regulations. We cannot guarantee that our costs relating to compliance with environmental laws will not exceed our established liabilities or, otherwise have an adverse effect on our business and results of operation.
The Argentine Consumer Protection Law (Law No. 24,240 as amended, or Consumer Protection Law) establishes a number of rules and principles for the protection of consumers. In addition, the Argentine Civil and Commercial Code establishes specific regulations for consumer contracts and introduces guidelines for interpreting both the rules governing consumer relations, and the provisions included in those contracts, prevailing in all cases the interpretation more favorable to consumers.
On September 18, 2014, the Argentine Congress approved three initiatives of the executive branch, one of which regulates issues related to the defense of consumer rights. The initiative creates a prior Conciliation Service in Consumer Relations (Servicio de Conciliación Previa en las Relaciones de Consumo), which we will refer to as COPREC, in order to solve controversies short of formal litigation, wherein users and consumers may submit their claims for free, which claims are typically solved within 30 days. Users and consumers may submit claims to COPREC in respect of amounts that do not exceed a value equivalent to 55 times the federal government's minimum adjustable wage for
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measurement purposes. In addition, companies that do not participate in the COPREC mediation may be subject to fines.
If no agreement is reached, consumers may file an appeal before the consumer relations audit, and then to the corresponding national or federal court of appeals. Consequences of the adoption of this law are still uncertain, which could lead to an increase in the number of complaints under the Consumer Protection Law, which could have an adverse effect on our operations if we are subject to these claims.
We may not be able to operate our recently acquired insurance brokerage business.
In connection with our acquisition of some of Compañía Argentina de Granos, S.A.'s businesses, we have acquired an insurance brokerage business which provides insurance policies to farmers as part of the broader array of farm products and services that we offer to farmers in exchange for cash or agricultural products. The insurance brokerage business does not currently represent a significant portion of the Agro-services business line. Under Argentine law, brokers and insurance agents are required to obtain authorization from, and be registered with, the Argentine Superintendency of Insurance, which we refer to as SSN. As of the date of this prospectus, Compañía Argentina de Granos S.A. possesses a temporary authorization, and until its permanent authorization is printed by the SSN it will be unable to transfer such authorization to us. As we have yet to obtain such authorization and are not registered with the SSN, we have not been able to engage in the insurance brokerage services which we have acquired. As a result, we have not taken over operations of the insurance business, and the business will continue to be actively managed by Compañía Argentina de Granos, S.A. until such time as they can successfully transfer their operation to us. Any delay in our ability to acquire the authorization or in Compañía Argentina de Granos S.A.'s ability to transfer such authorization may adversely affect our ability to operate the insurance brokerage business we acquired, which may in turn affect our results of operation and financial condition.
Price changes in the agricultural products and commodities we depend on for the production of primary food products may adversely affect our profitability.
The principal raw materials that we use are agricultural products that experience price volatility caused by external conditions such as weather, product scarcity, limited sources of supply, commodity market fluctuations, currency fluctuations, and changes in governmental agricultural policies and regulations. While many of our primary food product inputs are priced at their value on the delivery date, price changes in agricultural products and commodities may result in unexpected increases in primary food products and packaging input prices. In addition, we rely on certain paper, plastic and plastic substrates for our packaging business which may also be subject to price increases or a lack of availability. If we are unable to increase productivity to offset these increased costs or increase our prices, we may experience reduced margins and profitability. We do not fully hedge against the changes in price of commodities and agricultural products and the risk management procedures that we do use may not always work as we intend.
Unpredictable weather conditions and diseases striking our farmers' crops, potentially destroying some or all of our farmers' crops yields may have an adverse impact on crop production and may reduce the volume and quality we purchase in a given harvest.
The occurrence of severe adverse weather conditions, especially droughts, hail or floods are unpredictable and may have a potentially devastating impact upon crop production. Additionally, higher and lower than average temperatures and rainfall can contribute to an increased presence of insects. As a result, we cannot assure you that severe future adverse weather conditions will not adversely affect our business, results of operations and financial condition.
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The occurrence and effect of crop disease and pestilence can be unpredictable and devastating on crops, potentially rendering all or a substantial portion of the affected harvests unavailable. Although we buy from a vast network of geographically diverse farmers and have limited exposure to each individual farmer, their crops remain susceptible to fungus and bacteria that are associated with excessively moist conditions. Even when only a portion of a farmer's crops are damaged, our results of operations could be adversely affected because we may not be able to collect the full amount agreed to. Although some crop diseases are treatable and may increase demand for the agro-services we offer, the cost of treatment is high, and we cannot assure you that such events in the future will not adversely affect our results of operations.
Our failure to successfully integrate acquisitions into our existing operations could adversely affect our financial results.
From time to time, we evaluate potential acquisitions or joint ventures that would further our strategic objectives. Our success in these potential acquisitions depends, in part, upon our ability to integrate acquired businesses into our vertically integrated operations. If we are unable to successfully integrate acquisitions, our financial results could suffer. Additional potential risks associated with acquisitions include the incurrence of additional debt, the loss of key employees and customers of the acquired business, the assumption of unknown liabilities, the inherent risk associated with entering a geographic area or line of business in which we have no or limited prior experience, failure to achieve anticipated synergies, and the impairment of goodwill or other acquisition-related intangible assets. In addition, the due diligence we conduct in connection with an acquisition and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities resulting therefrom. A material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition all of which could have an adverse effect on our business and results of operation.
We may not be able to successfully integrate Cargill's operations into our business and may not achieve the anticipated benefits of the acquisition.
On August 31, 2016, we acquired Cargill's wheat mill operations in Latin America. The integration of Cargill's operations into our business involves numerous risks, including:
Assuming they reach maximum capacity, the plants acquired from the Cargill Acquisition have an installed milling capacity of approximately 1.57 million tonnes per year, an amount which increased our installed milling capacity by 81.4%. For the period from August 31, 2016 through November 30, 2016, Cargill was operating at approximately 61.0% of its capacity. If Cargill's operations and financial results do not meet our expectations, we may not realize the synergies, operating efficiencies, market position or revenue growth we anticipate from the acquisition. For further information, see "Prospectus SummaryCargill Acquisition" and "Presentation of Financial and Other InformationCargill Acquisition".
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The Cargill Acquisition could be affected by legal challenges associated with Argentine antitrust legislation.
The Argentine Antitrust Law No. 25,156 prevents anticompetitive practices and requires administrative authorization for transactions that would lead to market concentration. According to the Argentine Antitrust Law, such transactions include mergers, acquisitions and/or transfers either of businesses or assets by which the acquirer controls or substantially influences another party. Transactions completed by entities with an annual sales volume of more than AR$200.0 million must be submitted to the Argentine Antitrust Commission (Comisión Nacional de Defensa de la Competencia), which we refer to as the CNDC, for approval, subject to certain exemptions. Submissions may be filed either prior to the transaction or within a week after its completion.
On September 7th, 2016, we submitted a filing before the CNDC in order to obtain the approval of the Cargill Acquisition. The transaction is currently being analyzed by the CNDC and the parties have been notified with two requests for information. The CNDC may elect three separate outcomes for the Cargill Acquisition: (i) to authorize the transaction, (ii) to condition the transaction upon the fulfillment of certain conditions precedent or (iii) to reject the transaction. Any CNDC decision may be appealed to the Argentine courts.
The CNDC may impose certain conditions that may affect the Cargill Acquisition and our ability to integrate the assets purchased in such acquisition into our existing and future operations. The conditions that can be imposed by the CNDC range from the imposition of conduct requirements to requiring structural changes to our business. One of the structural changes that the CNDC could impose on us is a requirement that we divest from specific businesses, business lines or assets. In addition, in connection with the CNDC's ability to impose conduct requirements, we may be required to adhere to certain rules or practices in running our business, such as implementing a price reporting system. These remedies are typically negotiated with the CNDC and alternatives can be proposed for CNDC consideration. We cannot assure you that the CNDC will not impose conduct requirements which may burden our business and operations. Moreover, we cannot assure you the CNDC will not require us to sell any of our other existing businesses, assets or businesses lines in the event that it determines such sale to be necessary as a result of the Cargill Acquisition. The imposition of any such conditions as a result of the Cargill Acquisition may adversely affect our financial condition and results of operations as well as our ability to realize the economic benefits of the Cargill Acquisition.
As noted above, the CNDC may also elect to reject the Cargill Acquisition entirely. In such event, the CNDC may require that the Cargill Acquisition be unwound completely or that the assets or business be sold to a third party. Historically, the CNDC has elected outright rejection of transactions under its consideration only in relatively rare cases. Nonetheless, we cannot assure you that the CNDC will not outright reject the Cargill Acquisition, which would have an adverse effect on our financial condition and results of operation.
The CNDC is currently investigating a number of markets for goods and services, including certain markets in which we have operations, and the potential consequences of these investigations are not currently known. In addition, the prospect of amendments to the Antitrust Law currently under review of the Macri administration could have an adverse effect on our business or results of operation.
Pursuant to the Argentine Antitrust Law, the CNDC is entitled to initiate independent investigations against an individual or a public or private entity without having received a specific complaint. For instance, in April 2016, the CNDC announced the initiation of investigations in 11 markets in order to evaluate the level of competition in such markets. Some of the markets currently being investigated include markets for essential products and services, such as mobile communications, credit cards and payments systems, milk, beef and cooking oil, the latter of which is one of our principal markets. As of the date of this prospectus, these investigations are confidential and will remain confidential unless a complaint is brought by the CNDC against a company. We have not been notified of any complaint against us. As such, we have no knowledge of the current state of the
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investigation with respect to the cooking oil market or the findings therefrom. Our inability to anticipate the results of any investigation by the CNDC including, for example, the current investigation of the cooking oil market, as well as the results of any such investigations themselves, may subsequently have a material adverse effect on our business, results of operations and financial condition.
In addition, the Macri administration has announced the amendment of the Argentine Antitrust Law focused on protecting consumers and avoiding market disruptions, the replacement of the current CNDC members, and proposed improvements to the efficiency of the CNDC's internal processes. Therefore, the effect of such future amendments cannot be predicted and could affect our ability to undertake future mergers and acquisitions and our results of operations.
Certain aspects of the acquisitions made in connection with the Reorganization may result in additional unforeseen liabilities and obligations that may adversely affect our financial condition and results of operation or that may be reflected in subsequent consolidated combined financial statements.
As part of the Reorganization, we have acquired (i) certain portions of MOLCA S.A.'s assets and activities related to its Las Palmas port operations; and (ii) certain businesses of Compañía Argentina de Granos S.A. relating to the sale of products and services to agriculture producers and the purchase, storage, transport and sale of oilseeds and grains.
These transfers of assets and liabilities were made without following the procedures set forth in the Argentine Law for the Transfer of Going Concerns, or Ley de Transmisión de Establecimientos Comerciales e Industriales. In accordance with the terms of such law, therefore, we may be held jointly liable with the respective sellers for any liabilities arising from the businesses acquired. Any such liabilities are not currently reflected in our audited consolidated combined financial statements and if any such liabilities are ultimately recognized it may have an adverse effect on our business, results of operations and financial condition.
Pursuant to IFRS, any consideration given or received in relation to transactions are recognized directly in equity as withdrawals or contributions at the acquisition date. However several of the acquisitions conducted in connection with the Reorganization will not have occurred until after the fiscal year ended November 30, 2016. As a result, the impact of certain payments or consideration made in connection with the Reorganization are not fully reflected in our consolidated combined statement of financial position and consolidated combined statements of equity as of and for the fiscal year ended November 30, 2016.
If we are not efficient in our production and productivity, our profitability could suffer as a result of the highly competitive environment in which we operate.
Our future success and earnings growth depend in part on our ability to be efficient in the production and manufacture of our products in highly competitive markets. Gaining additional efficiencies may become more difficult over time. For example, as of the date of this prospectus, we convert approximately 77% of the wheat we process into flour. Although we believe this percentage is close to the market standard, this rate of efficiency may not be easily increased if required. Our failure to reduce costs through productivity gains or by eliminating redundant costs resulting from acquisitions or divestitures could adversely affect our profitability and weaken our competitive position. Many productivity initiatives involve reorganization of production facilities and production lines or the development of assets, such as the construction of the Spegazzini facility. In addition, as of today, the installed milling capacity of the mills acquired from Cargill is 1.57 million tonnes per year. We cannot assure that we will succeed to fully combine operations with our existing milling capacity. Such manufacturing expansion, unsuccessful enhancement of milling capacity or project investments may result in the interruption of production or the disruption of our logistics network, which may negatively impact product volume and margins. If we are unable to successfully execute those initiatives as
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planned, we may not realize all or any of the anticipated benefits, which could adversely affect our business, results of operations and financial condition.
Our planned expansion of the Las Palmas Port and the development of the Five Nations Industrial Park may be subject to construction and financing delays or lower than expected profits that may affect the feasibility of these projects.
We are currently planning and evaluating the expansion of the Las Palmas Port and the development of the Five Nations Industrial Park. For more information on these projects see "BusinessNew Projects and Investments".
Both projects remain in their initial phases and are subject to numerous risks including, but not limited to, the following:
Any one or a combination of the foregoing financing, operative and business risks, should they occur, may lead to a delay, decreased profitability or cancellation of our projects. Such delay, decreased profitability or cancellation may have an adverse effect on our business, results of operation or financial condition.
Failure to maintain our relationships with labor unions may have an adverse effect on us.
The majority of our workforce is represented by labor unions. While we have enjoyed satisfactory relationships with all of the labor organizations that represent our employees and we believe our relationships with labor organizations will continue to be satisfactory, labor-related disputes may still arise. Labor disputes that result in strikes or other disruptions could also cause increases in operating costs, which could damage our relationships with our customers and adversely affect us. Prior to the negotiation of our most recent labor agreement with the employees at our Uruguay facility, we had a five-day work stoppage during the period in which salary counsel negotiations were taking place nation-wide. In addition, in May of 2015 there was a 26-day nation-wide strike in Argentina of the union for edible oil workers known as the Aceiteros. Other than this brief stoppage in our Uruguay facility and the national strike in Argentina, which affected our operations, we have not had a labor stoppage or other material labor dispute in the last three years.
In addition, we may be materially and adversely impacted as a result of increases in our labor costs. Under Argentine law, wages are subject to increase following negotiations between the unions and each chamber of commerce group for a particular industrial or commercial activity. Salary increases are generally in line with inflation, which has been high in Argentina. While many of our products may face similar price increases, we cannot assure you that an increase in wages due to inflation or otherwise will not supersede any such price increase. A shortage in the labor pool or other general inflationary pressures or changes in applicable laws and regulations could increase labor cost, which could have a material adverse effect on our results of operations.
Increased distribution costs or disruption of transportation services could adversely affect our business and financial results.
Distribution costs have historically fluctuated significantly over time, particularly in connection with oil prices and salary increases, and increases in such costs could result in reduced profits. In addition,
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certain factors affecting distribution costs are controlled by our third-party carriers. These factors could impact our commercial reputation and result in our customers reducing or ceasing to order our products due to increased shipping costs. Any increases in the cost of transportation, and any disruption in transportation, could have a material adverse effect on our business, results of operations and financial condition. We require the use of refrigerated vehicles to ship certain of our retail products and such distribution costs represent an important element of our cost structure for products in our Retail Products segment.
Concerns with the safety and quality of food products could cause consumers to avoid certain food products or ingredients.
We could be adversely affected if consumers in our principal markets lose confidence in the safety and quality of certain food products or ingredients. Adverse publicity about these types of concerns, whether or not valid, may discourage consumers from buying our products or cause production and delivery disruptions.
If our retail products and branded industrial products become adulterated, misbranded, or mislabeled, we might need to recall those items and may be subject to product liability claims if consumers are injured.
The sale of food products for human consumption involves the risk of injury to consumers. These injuries may result from tampering by third parties, bioterrorism, product contamination or spoilage, including the presence of bacteria, pathogens, foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling or transportation phases.
We may need to recall some of our retail products and branded industrial products if they become adulterated, misbranded, or mislabeled. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost revenue due to the unavailability of retail products for a period of time. Similarly, we cannot be sure that consumption of our products will not cause a health-related illness in the future or will not be subject to product liability claims or lawsuits relating to such matters. In such an event, we could also suffer losses from a significant product liability judgment against us. A significant retail product recall or product liability case, even if such liability case was unsuccessful, could also result in adverse publicity, damage to our reputation, the incurrence of significant legal expense and a loss of consumer confidence in our retail products and branded industrial products, which could have an adverse effect on our business results and the value of our brands.
We may be unable to anticipate changes in consumer preferences and trends, which may result in decreased demand for our products.
Our success depends in part on our ability to anticipate the tastes and eating habits of consumers and to offer products that appeal to their preferences. Consumer preferences and the level of demand for our products may change from time to time and can be affected by a number of different trends and other factors. If we fail to anticipate, identify or react to these changes and trends, or to introduce new and improved products on a timely basis, we may experience reduced demand for our products, which would in turn cause our revenues and profitability to suffer. Our main strategy to achieve growth is to enhance our portfolio by adding innovative new products in faster growing and more profitable categories or by entering altogether new product categories. If we do not succeed in developing innovative products or launching new product categories, our growth may slow, which could adversely affect our profitability. In the future, the demand for our products could be affected by certain trends such as low-carbohydrate diets or concerns regarding the health effects of processed wheat. Similarly, demand for our products could be affected by consumer concerns regarding the health effects of ingredients such as, for example, sodium, trans fats, genetically modified organisms, sugar, or other product ingredients or attributes.
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Our results may be negatively impacted if consumers do not maintain their favorable perception of our brands.
Maintaining and continually enhancing the value of our many top of mind brands is critical to the success of our business. The value of our brands is based in large part on the degree to which consumers react and respond positively to these brands. Brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our products, our failure to maintain the quality of our products, the failure of our products to deliver consistently positive consumer experiences, concerns about food safety or the unavailability of our products to consumers. Consumer demand for our products may also be impacted by changes in the level of advertising or promotional support. The growing use of social and digital media by consumers, and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands, or our products on social or digital media could seriously damage our brands and reputation. If we do not maintain the favorable perception of our brands, our business results could be negatively impacted.
The agro-services we offer as part of our Agro-Services and Sustainable Sourcing segment is dependent on supplier financing, the unavailability of which may adversely affect our financial condition and results of operation.
The agro-services we offer, as part of our Agro-Services and Sustainable Sourcing segment, involve the sale of agrochemicals, fertilizer, seeds, machinery, telecommunication, and other farming products and services to the farmers from whom we purchase agricultural products. Many of the products we offer to farmers are provided to us on the basis of supplier financing with long repayment periods. If our suppliers were to significantly reduce the amount or duration of financing that they offer, we may be required to rely on bank financing and other mechanisms in order to remain competitive, which may carry additional costs or negatively affect our financial statements. As such, if we are no longer able to rely on such supplier financing, our financial condition and results of operation may be adversely affected.
Our business is seasonal, and our cash flow may fluctuate significantly depending on the crop growing cycle.
As with any agricultural business enterprise, the activities in our Agro-Services and Sustainable Sourcing segment are predominantly seasonal in nature. The harvest and sale of crops (wheat, sunflower, soybean, corn, barley, and sorghum) generally occurs from December to June. Wheat is harvested from December to February. Sunflower seeds are harvested from February to April. Our operations and sales are affected by the growing cycle of the crops we process. The annual soybean harvest period in Argentina begins in March and ends in August. This creates fluctuations in our inventory, usually peaking in May to cover sales between crop harvests (i.e., December through October), and a degree of seasonality in our cash flow, with cash flows significantly lower in the last quarter of the fiscal year. Seasonality could have a material adverse effect on the results of operation in our Agro-Services and Sustainable Sourcing segment which represented 33% and 53% of net sales to third parties for the years ended November 30, 2015 and 2016, respectively.
In addition, certain business lines in our Retail Products and our Branded Industrial Products segments are also subject to seasonality. In particular, our pasta business line and flour business line are subject to fluctuations in the course of the year. Our pasta business line peaks from April through August and also expands during the holidays (with 10% of sales occurring in July of 2016 year and 4% in December for the fiscal year ended November 30, 2016). Additionally, our flour business line for our Retail Products segment peaks from June through July with a trough in consumption in December and January. The difference between the peak and trough periods is 30%. The flour business line in our Branded Industrial Products segment is subject to less volatility with the December through January period resulting in a 15% trough in sales. Therefore, as a result of fluctuation in our Retail Products, Branded Industrial Products and Agro-Services and Sustainable Sourcing segments our cash flow has
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varied significantly from period to period in the course of the year, and is likely to continue to vary, due to seasonal factors.
Increased energy prices and frequent interruptions of the energy supplied to us for purposes of the manufacture, storage and distribution of our products could adversely affect our business.
The price of electricity and other energy resources, such as fuel, required in the manufacture, storage and distribution of our products is subject to volatile market conditions and changes in regulation. In addition the transportation services we engage require amounts of fuel oil and other resources for the transport of our products. Our freight and delivery expenses constituted 8.9%, 9.4% and 9.7% of our total costs for the fiscal year ended November 30, 2014, 2015 and 2016, respectively. Similarly, we incur expenses related to our production activities. Utilities costs constituted 2.6%, 2.8% and 3.6% of our total costs for the fiscal year ended November 30, 2014, 2015 and 2016, respectively. Market conditions and changes in regulation are often affected by political and economic factors beyond our control, including, for instance, the energy policies of the countries in which we operate. For example, the federal government's decision to phase out energy subsidies could cause electricity prices in Argentina to suffer a further increase. In addition the country currently is importing a fair portion of its energy needs from other countries.
Any sustained increases in energy costs could have an adverse effect on the attractiveness of our products for our customers and consumers and could affect our competitive position if our competitors' energy costs do not increase at the same rate as ours. In addition, disruptions in the supply of energy resources could temporarily impair our ability to manufacture products for our customers. Such disruptions may also occur as a result of the loss of energy supply contracts or the inability to enter into new energy supply contracts on commercially attractive terms. While some of our facilities utilize different sources of energy and have attempted to stock their required supplies ahead of higher demand periods, we cannot assure you that we will be able to procure the required energy inputs at acceptable prices. In the past, one of our production facilities has suffered shut offs or limitations on natural gas supply due to actions by the federal government or Ente Nacional Regulador del Gas.
Disruption of our supply chain through force majeure or other events could adversely affect our business.
Our ability to make, move, and sell products is critical to our success. Any damage or disruption to our supply of agricultural products, primary food products or our manufacturing or distribution capabilities due to weather, including any potential effects of climate change, natural disaster, fire, terrorism, cyber-attack, pandemic, strikes, import restrictions, or other factors could impair our ability to manufacture or sell our products. Failure to deliver our perishable food products promptly could also result in inventory spoilage. In addition, the agricultural product elevators which we operate are highly susceptible to fire and any fire or explosion may damage our supply of agricultural products and oil seeds.
In addition, our farmers' policies and practices can damage our reputation and the quality and safety of our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when certain of our agricultural products are sourced from a smaller group of farmers or a specific location, could adversely affect our business, results of operations and financial condition, as well as require additional resources to restore our supply chain.
We are subject to extensive environmental regulation, and concerns regarding climate change may subject us to even stricter environmental regulations.
Our activities are subject to a broad set of laws and regulations relating to the protection of the environment. Such laws include the management of pesticides and associated hazardous waste, the acquisition of permits for water use and effluents disposal and the approval of environmental impact
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assessments. In addition, the storage and processing of our products, such as agrochemical and other pesticides, may create hazardous conditions. We could be exposed to criminal and administrative penalties in addition to the obligation to remedy the adverse effects of our operations on the environment and to indemnify third parties for damages.
We have incurred, and will continue to incur, capital and operating expenditures to comply with these laws and regulations. Because of the possibility of unanticipated regulatory measures or other developments, particularly as environmental laws become more stringent, the amount and timing of future expenditures required to maintain compliance could increase from current levels and could adversely affect the availability of funds for capital expenditures and other purposes. Compliance with existing or new environmental laws and regulations, as well as obligations in agreements with public entities, could result in increased costs and expenses.
Environmental laws and their enforcement are becoming more stringent in Argentina and Brazil increasing the risk of and penalties associated with violations, which could impair or suspend our operations or projects. Our operations expose us to potentially adverse environmental legislation and regulation. Failure to comply with past, present or future laws could result in the imposition of fines, third-party claims, and investigation by environmental authorities and the relevant public attorney office. For example, the perceived effects of climate change may result in additional legal and regulatory requirements to reduce or mitigate the effects of our industrial facilities' emissions. Such requirements, if enacted, could increase our capital expenditures and expenses for environmental compliance in the future, which may have a material adverse effect on our business, results of operations and financial condition. Moreover, the denial of any permit that we have requested, or the revocation of any of the permits that we have already obtained, may have an adverse effect on our results of operations.
We rely on retailers, wholesalers and distributors for our Retail Products segment sales, and if they perform poorly or give preference to competing products, we could be negatively affected.
We derive significant operating revenues from sales to retailers in our Retail Products segment. We sell our products to large retailers, such as supermarkets and hypermarkets, and to smaller traditional retailers, such as small convenience stores, in addition to selling our products to wholesalers and distributors. These retailers, wholesalers and distributors, in turn, sell our products to consumers. We also operate and supply direct points of sale, which we refer to as Puntos Caliente, in several large supermarkets. Any significant deterioration in the business performance of our retail, wholesale or distribution customers could adversely affect the sales of our products, including the success of our Puntos Caliente. Retailers, wholesalers and distributors also carry products of our competitors. While we have market leadership positions in staple products, which helps to improve our bargaining position with producers, there is a risk that retailers, wholesalers or distributors may give greater priority to products of, or form alliances with, our competitors or their own private labels other than with respect to our products. If retailers, wholesalers or distributors fail to purchase our products, or fail to offer our products with promotional support, our business, results of operations and financial condition could be adversely affected.
Economic downturns could limit consumer demand for our products.
The willingness of consumers to purchase our products depends in part on local economic conditions. In periods of economic uncertainty, consumers may purchase more generic, private label and other economy brands and may forego certain purchases altogether. While many of our products are staples and have low income elasticity, in such circumstances, we could experience a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings. In addition, as a result of economic conditions or competitive actions, we may be unable to raise our prices sufficiently to protect margins. Consumers may also reduce the amount of food that they consume away from
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home, or reduce the purchase products from our Puntos Caliente and Retail Products segment. Any of these events could have an adverse effect on our results of operations.
We are required to carry significant amounts of inventory across our business. If our internal controls over inventory levels are not managed adequately, we could be negatively affected.
Within our Agro-Services and Sustainable Sourcing segment, the quantity of agricultural products recorded in our inventory, which may include third-party agricultural products held in storage, may not be adequately recorded in our internal systems due to the sudden and significant increase during harvest periods, producing human or operational errors and decreases below an acceptable level. Such inadequate records may create problems in fulfilling our obligations with our customers and/or providers of agricultural products, and as a consequence, our business, results of operations, and financial condition may be adversely affected.
We may be unable to maintain our profit margins in the face of a consolidating retail environment.
There has been significant consolidation among large retailers in the grocery industry in South America, resulting in customers with increased purchasing power. In addition, large retail customers may seek to use their position to improve their profitability through improved efficiency, lower pricing, increased reliance on their own brand name products, increased emphasis on generic and other economy brands, and increased promotional programs. For the fiscal year ended November 30, 2016, Carrefour accounted for 24% of our total domestic sales to supermarkets in tonnes, while DIA accounted for 18% and Jumbo 14%. If we are unable to use our scale, marketing expertise, product innovation, knowledge of consumers' needs, and category leadership positions to respond to the demands of these larger supermarket chains, our profitability and volume growth could be negatively impacted. In addition, the loss of any large customer for an extended length of time could adversely affect our revenue and profits.
We have a substantial amount of indebtedness, which could limit financing and other options and in some cases adversely affect our ability to pay dividends.
As of November 30, 2016, we had total financial liabilities (including borrowings, obligations under finance leases and discounted notes, which consists of payment obligations owed to us that we sell at a discount to banks) of AR$10,379 million (US$654 million). The agreements under which we have incurred indebtedness place certain limitations on our ability to incur additional unsecured indebtedness in the future. Our level of indebtedness may limit our:
There are various financial covenants and other restrictions in our debt instruments. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness with cross default provisions) could become due and payable prior to its stated maturity and our ability to obtain additional or alternative financing may also be adversely affected. We have also requested certain waivers in connection with compliance with certain financial ratios and covenants under our IFC Facility; and while we expect to obtain these waivers, there can be no assurance that we will be able to do so. For further information on these waivers, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsSegment Information and Non-IFRS Financial MeasuresIndebtednessNon-Current or Long-Term DebtIFC Facility". In addition, our indebtedness contains several financial covenants and ratios which limit our ability to pay dividends if we cannot meet them.
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Global capital and credit market issues could negatively affect our liquidity, increase our costs of borrowing, and disrupt the operations of our suppliers and customers.
We depend on stable, liquid, and well-functioning capital and credit markets to fund our operations. Although we believe that our operating cash flows, financial assets, access to capital and credit markets, and revolving credit agreements will permit us to meet our financing needs for the foreseeable future, there can be no assurance that future volatility or disruption in the capital and credit markets will not impair our liquidity or increase our costs of borrowing. In addition, due to the fact that we do not currently use derivatives in order to hedge currency risk, we may experience an increase in our costs of borrowing as most of our debt is Dollar denominated. We may however, utilize interest rate derivatives to reduce the volatility of our financing costs. Our business could also be negatively impacted if our suppliers or customers experience disruptions resulting from tighter capital and credit markets or a slowdown in the general economy.
Our business operations could be disrupted if our information technology systems fail to perform adequately or are breached.
Information technology serves an important role in the efficient and effective operation of our business. We rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information to manage a variety of business processes and to comply with regulatory, legal, and tax requirements. Our information technology systems and infrastructure are critical to effectively manage our key business processes including digital marketing, order entry and fulfillment, supply chain management, finance, administration, and other business processes. These technologies enable internal and external communication among our locations, employees, suppliers, customers, and others and include the receipt and storage of personal information about our employees, consumers, and proprietary business information. Our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to damage, interruption, or shutdown due to any number of causes such as catastrophic events, natural disasters, fires, power outages, systems failures, telecommunications failures, security breaches, computer viruses, hackers, employee error or malfeasance, and other causes. Increased cyber-security threats pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems. The failure of our information technology systems to perform as we anticipate could disrupt our business and result in transaction errors, processing inefficiencies, data loss, legal claims or proceedings, regulatory penalties, and the loss of revenue and customers. Any interruption of our information technology systems could have operational, reputational, legal, and financial impacts that may have a material adverse effect on our business.
Our current insurance coverage may not be sufficient to cover our potential losses.
Our operations are, in general, subject to different risks and hazards, including adverse weather conditions, fires, diseases and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework applicable to us, environmental contingencies and other natural phenomena. Our insurance currently covers only part of the losses we may incur and does not cover losses of undelivered agricultural products due to hail, fire or similar risks. Furthermore, although we maintain insurance at levels that are customary in our industry in the countries in which we operate, certain types of risks may not be covered by the policies we have for our industrial facilities. Additionally, we cannot guarantee that the indemnification paid by the insurer due to the occurrence of a casualty covered by our policies will be sufficient to entirely compensate us for the damages suffered. Moreover, we may not be able to maintain or obtain insurance of the type and amount desired at reasonable costs. If we were to incur significant liability for which we were not fully insured, it could have a materially adverse effect on our business, financial condition and results of operations.
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Certain risks associated with the operation of a port, may have an adverse effect on the results of operation of the Las Palmas port and any of our expansion plans associated with it, which may in turn have an adverse effect on our results of operation.
The container and other activities associated with the Las Palmas port and related services are primarily dependent on global trading volume and demand for agricultural product exports. Our port operations are subject to many risks and other factors, including the following:
We cannot assure you that our cargo may not be subject to flooding in the future or that such damage will be similarly covered by our existing insurance. In addition, any of the above factors whether individually or taken together could have a material adverse effect on our port operations or may delay or cancel our regional expansion activities or the future development of the Five Nations Industrial Park which is adjacent to the Las Palmas port.
We are dependent on executive officers.
Our success depends, to a significant extent, on the continued employment of our executive officers, who have significant expertise and knowledge of our business and industry. Due to their experience and leadership capabilities, it may be difficult to find suitable replacements for them if they were to cease serving in their respective roles. The loss or interruption of their services for any reason could have a material adverse effect on our business. Our future success also depends in part upon our ability to attract and retain other highly qualified personnel. We cannot assure you that we will be successful in hiring or retaining qualified personnel, or that any of our personnel will remain employed by our Company. Furthermore, any delay in finding, hiring or retaining a suitable replacement to any departing executive officer or highly qualified personnel could adversely affect our business, results of operations and financial condition.
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We could lose customers if we fail to separate products that contain genetically modified organisms from those that do not.
The use of genetically modified organisms, or GMOs, in food and animal feed has been met with varying degrees of acceptance in the different markets in which we operate. For example, the United States and Argentina have approved the use of GMOs in food products and animal feed, and GMO and non-GMO agricultural products is produced and frequently commingled during the agricultural product sourcing process. However, adverse publicity about genetically modified food has led to government regulations that limit sales of GMO products in some of the markets where we sell our products, including, most significantly, the European Union. Our sourcing operations are already equipped to segregate GMOs from non-GMO inputs and our processes and production could be adapted relatively quickly to a change in regulations; but we cannot assure you that our controls will always work to meet requirements set by foreign markets. As a result, should we be unable to meet GMO-related requirements set by foreign markets, or if it takes us longer than our competitors to satisfy such requirements our business, results of operations and financial condition could be adversely affected.
We depend on international trade and economic and other conditions in key export markets for our products.
Our operating results depend largely on economic conditions and regulatory policies for our products in major export markets. Our ability to compete effectively in these export markets may be adversely affected by a number of factors that are beyond our control, including the deterioration of macroeconomic conditions, volatility of exchange rates, the imposition of greater tariffs or other trade barriers or other factors in those markets, such as regulations relating to chemical content of products and safety requirements. Due to the growing participation in worldwide primary food products markets by primary food producers in South America, South American exporters, including us, are increasingly affected by the measures taken by importing countries in order to protect their local producers. Measures such as the limitation on imports adopted in a particular country or region may affect the sector's export volume significantly and, consequently, our operating results.
The European Union has a zero tolerance policy with respect to the import of genetically modified organisms, or GMOs. See "We could lose customers if we fail to separate products that contain genetically modified organisms from those that do not". While the recent drought in Europe has led to the relaxation of these restrictions for certain products, we cannot assure you that we will continue to be able to export any of our products with GMOs to the European Union. If the sale of our products into a particular importing country is adversely affected by trade barriers or by any of the factors mentioned above, the relocation of our products to other countries on terms equally favorable could be impaired, and our business, financial condition and operating results may be adversely affected.
Our market share information is based on statistical studies that may be subject to variation or error.
Our management relies on market share information provided by CCR and Nielsen which contains certain estimates and projections based on certain statistical procedures and generally used practices in the area of marketing. Some of the sources of information used in connection with the preparation of these studies are not always under our or Nielsen's or CCR's control. Further, some of these practices and procedures are subject to estimation and margin of error inherent in statistical analysis. In addition, these studies only cover certain distribution channels, and, as such, may not reflect the totality of the market. Finally, such studies may be subject to data base errors or other risks. As a result, while our management relies on this information for its strategic decision-making, we cannot assure you that such information may not be subject to error. Similarly, the information included in this prospectus may also be subject to error or may change with time. As such, care should be taken when relying the same.
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On June 23, 2016, the United Kingdom, the "UK", voted by a majority in favor of the British Government taking the necessary action for the UK to leave the European Union.
The outcome of the UK's referendum on membership in the European Union, held on June 23, 2016, was that the UK voted by a majority in favor of the British government taking the necessary action for the UK to leave the European Union. At this time, it is not certain what steps will need to be taken to facilitate the UK's exit from the European Union or the length of time that this may take. Furthermore, the UK's decision to leave the European Union has caused, and is anticipated to continue to cause, significant new uncertainties and instability in the financial markets, which may affect us and the trading price of our Class B ordinary shares and/or the ADSs. These uncertainties could have a material adverse effect on our fiscal condition or prospects. In addition, it is unclear at this stage what the impacts of the UK's departure from the European Union will ultimately be for us or the trading price of our Class B ordinary shares and/or the ADSs.
If U.S. President Donald Trump follows through with his proposals to impose significant tariffs or other restrictions on the countries to which we export, our revenues and results of operations may be materially harmed.
Donald Trump's victory in the U.S. presidential election, as well as the Republican Party maintaining control of both the House of Representatives and Senate of the United States in the congressional election, has created uncertainty with how trade would be affected. During the election campaign, President Trump suggested imposing a tariff on several countries that represent important export destinations for our agricultural products and primary food products as part of our Agro-Services and Sustainable Sourcing segment and Branded Industrial Products segment. If any such restrictions or tariffs are imposed on these export destinations, the resulting decrease in demand may have an adverse effect on our exports. As a result, we cannot assure you that any significant increase in tariffs, may not have an adverse effect on the economic performance of our primary export markets and consequently on our results of operation.
Risks Related to the ADSs and our Class B Ordinary Shares
You may not be able to sell the Class B ordinary shares or ADSs you own at the time or the price you desire because an active or liquid market for these securities may not develop.
Prior to the Global Offering, there has not been a public market for our Class B ordinary shares or ADSs. We intend to apply to list the ADSs on the NYSE. We also intend to apply to list and trade our Class B ordinary shares in Argentina on the BYMA. We cannot predict whether an active liquid public trading market for the ADSs will develop or be sustained. Active, liquid trading markets generally result in lower price volatility and respond more efficiently to orders from investors to purchase or sell securities. The liquidity of a securities' market is often a function of the volume of the underlying Class B ordinary shares that are publicly-held by unrelated parties. Although ADSs holders are entitled to withdraw Class B ordinary shares underlying the ADSs from the ADS Depositary at any time, the BYMA in Argentina is generally a less liquid trading market than the NYSE. As a result, holders may be unable to trade actively in the markets.
The market price for our Class B ordinary shares or ADSs could be highly volatile, and our Class B ordinary shares or ADSs could trade at prices below the initial offering price.
The market price for our Class B ordinary shares or the ADSs after the Global Offering is likely to fluctuate significantly from time to time in response to factors including:
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Volatility in the price of our Class B ordinary shares or the ADSs may be caused by factors outside of our control and may be unrelated or disproportionate to our operating results. In particular, announcements of potentially adverse developments, such as proposed regulatory changes, new government investigations or the commencement or threat of litigation against us, as well as announced changes in our business plans or those of competitors, could adversely affect the trading price of our Class B ordinary shares or the ADSs, regardless of the likely outcome of those developments or proceedings. Broad market and industry factors could adversely affect the market price of our Class B ordinary shares or ADSs, regardless of our actual operating performance. As a result, our Class B ordinary shares or ADSs may trade at prices significantly below the initial public offering price.
Actual or anticipated sales of a substantial number of our ordinary shares or the ADSs could decrease the market prices of our Class B ordinary shares and ADSs.
Following the Global Offering, certain of the selling shareholders may continue to hold Class A ordinary shares representing up to % of our capital stock. Sales of a substantial number of our ordinary shares or ADSs after the consummation of the Global Offering, or the anticipation of such sales, could decrease the trading price of the Class B ordinary shares and the ADSs. Although the selling shareholders have agreed to refrain from any sales of their ordinary shares or ADSs for 180 days following the consummation of the Global Offering, we cannot assure you that these shareholders will not choose to sell all or a significant part of their remaining ordinary shares or the ADSs immediately following the expiration of this 180-day period. For further information on the selling shareholders and their participation in the Company, see "Principal and Selling Shareholders".
We are controlled by our principal shareholders.
As of the date of this prospectus, members of the Navilli family, our principal shareholders, own in the aggregate 100% of our share capital, as described in "Principal and Selling Shareholders". Even after giving effect to the Global Offering, the Navilli family will still own a controlling stake of our share capital. Each ordinary share of our share capital represents the same economic interests. However, as the sole holders of our Class A ordinary shares, the Navilli family will be entitled to five votes per each Class A ordinary share while holders of our Class B ordinary shares shall be entitled to one vote per each Class B ordinary share. According to our bylaws, a two-thirds vote by our Class A ordinary shares is required, regardless of the percentage of capital they represent, in order for us to duly resolve a merger with another company, a voluntary dissolution, our relocation abroad and fundamental change in our corporate purpose. As a result of this significant difference in voting interests, our principal shareholders will be able to elect a majority of the members of our board of directors, direct our management and determine the result of substantially all resolutions that require shareholders' approval, including fundamental corporate transactions and the payment of dividends by us. Due to the increased voting power of our Class A ordinary shares, this ability to control and direct our operations may persist even in the event that the Navilli family holds less than a majority of the
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economic interests in our ordinary shares. The Navilli family's interests may conflict with your interests as a holder of Class B ordinary shares or ADSs, and they may take actions that might be desirable to them but not to other shareholders. For more information on the composition of our principal shareholders see, "Principal and Selling Shareholders".
We will have broad discretion in the use of proceeds from the Global Offering and may use them in ways that may not enhance our operating results or the price of the Class B ordinary shares or ADSs.
We will have broad discretion over the use of proceeds from the Global Offering. You may not agree with our decisions, and our use of the proceeds may not yield a favorable return, if any, on your investment. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of the Global Offering. If we do not invest or apply the proceeds of the Global Offering in ways that improve our operating results, we may fail to achieve expected financial results, which could cause the price of our Class B ordinary shares or ADSs to decline. For further information on how we intend to use the proceeds of the Global Offering, see "Use of Proceeds".
Due to our first-time adoption of IFRS and the Reorganization, our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our results of operation and financial reporting process.
As we are a first time adopter of IFRS and prepared our first IFRS financial statements in 2016, we have had to face many challenging and complex accounting and financial reporting issues. As a private company, except pursuant to contractual obligations, we were not required to produce annual or quarterly periodic reporting in the past. In addition, in connection with the Reorganization, several businesses that previously operated separately, albeit under common control, are now unifying their reporting activities for the first time. As such, many of our financial reporting and internal controls have undergone significant changes in a short period. Improving internal control over financial reporting and mitigating the risks in our financial reporting processes continue to be top priorities. In the course of preparing our audited consolidated combined financial statements, we identified several improvement areas related to internal control issues, on which management has taken action. These were primarily in respect of the need for improvement in our information technology general controls and the need to enhance monitoring controls within financial operations and reporting functions. While we believe we have made progress in the implementation and adaptation of our internal control, these will continue to pose significant challenges to our financial reporting process.
Upon becoming a registered public company and as we continue with our activities relating to the testing of internal controls, we may identify internal control issues.
As part of our preparation in connection with the Global Offering, we began a more comprehensive review of our internal control environment in order to be ready to comply with the requirements of U.S. law, including the Sarbanes-Oxley Act. This review includes an assessment of the design and effectiveness of our internal control environment under the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. We believe that this process will provide consistency in evaluations and verification of the appropriateness and completeness of our activities. We will regularly monitor and report on our review of internal controls to executive officers, our Board of Directors, our external auditors and to the market, if material weaknesses are identified.
As a foreign private issuer we will not be immediately required to comply with the attestation reports. However, we intend to evaluate our internal controls over financial reporting in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act and
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rules and regulations of the SEC thereunder, which we refer to as Section 404. The process of documenting and testing our internal control procedures in order to satisfy the requirements of Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. During the course of our testing, we may identify deficiencies of which we are not currently aware.
If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our audited consolidated combined financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets and possibly, harm our results of operations, and lead to a decline in the trading price of our Class B ordinary shares.
Investors may not be able to effect service of process within the United States limiting their recovery of any foreign judgment.
We are a publicly held corporation (sociedad anónima commercial, industrial, financiera, inmobiliaria y agropecuaria) organized under the laws of Argentina. Substantially all of our directors and our executive officers, and a significant part of our and their assets are located in Argentina. As a result, it may not be possible for investors to effect service of process within the United States upon us or such persons or to enforce against us or them in United States courts judgments obtained in such courts predicated upon the civil liability provisions of the United States federal securities laws. There is doubt whether the Argentine courts will enforce, to the same extent and in as timely a manner as a U.S. or foreign court, an action predicated solely upon the civil liability provisions of the United States federal securities laws or other foreign regulations brought against such persons or against us. In addition, the enforceability in Argentine courts of judgments of U.S. or non-Argentine courts with respect to matters arising under U.S. federal securities laws or other non-Argentine regulations will be subject to compliance with certain requirements under Argentine law, including the condition that any such judgment does not violate Argentine public policy (orden público).
You will experience immediate and substantial dilution in the book value of the Class B ordinary shares or ADSs you purchase in the Global Offering.
Because the offering price of the Class B ordinary shares and ADSs being sold in the Global Offering will be substantially higher than the net tangible book value per share, you will experience immediate and substantial dilution in the book value of these Class B ordinary shares or ADSs. Net tangible book value represents the amount of our tangible assets, minus our pro forma total liabilities. Moreover, if you do not exercise your rights under the Class B ordinary shares rights or ADSs, as the case may be, you will also experience immediate and substantial dilution in the book value of your Class B ordinary shares or ADSs. See "Dilution".
As a foreign private issuer, we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.
As a foreign private issuer, we will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act, and we will generally be exempt from filing quarterly reports with the SEC under the Exchange Act.
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Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the NYSE, which may limit the protections afforded to investors.
We are a foreign private issuer within the meaning of the NYSE corporate governance standards. Under NYSE rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We will follow certain Argentine practices concerning corporate governance and intend to continue to do so. Accordingly, holders of our Class B ordinary shares or ADSs will not have the same protections afforded to shareholders of companies that are subject to all NYSE corporate governance requirements.
For example, the NYSE listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a "controlled company". Under Argentine corporate governance practices, an Argentine company is not required to have a majority of independent members on its board of directors. Notwithstanding, pursuant to the Argentine Capital Markets Law, and its corresponding regulations, listed companies in Argentina are required to have an audit committee consisting of at least three members of our Board of Directors, the majority of which (that is, at least two members) must be independent directors. Under SEC standards applicable to us, all audit committee members will need to be independent following an initial transition period. The listing standards for the NYSE also require that U.S. listed companies, at the time they cease to be "controlled companies," have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Argentine law, an Argentine company may, but is not required to, form special governance committees, which may be composed partially or entirely of non-independent directors. In addition, NYSE rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Argentine law.
The NYSE's listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. We are not required to comply with all of the NYSE's corporate governance guidelines and are instead only required to describe any differences between our governance practices and those requirements. For a further description of our corporate governance regime, see "ManagementCorporate Governance Practices".
The protections afforded to minority shareholders in Argentina are different from and more limited than those in the United States and may be more difficult to enforce.
Under Argentine law, the protections afforded to minority shareholders are different from, and much more limited than, those in the United States. For example, the legal framework with respect to shareholder disputes, such as derivative lawsuits and class actions, is less developed under Argentine law than under U.S. law as a result of Argentina's short history with these types of claims and few successful cases. In addition, there are different procedural requirements for bringing these types of shareholder lawsuits. As a result, it may be more difficult for our minority shareholders to enforce their rights against us or our directors or controlling shareholder than it would be for shareholders of a U.S. company.
Under Argentine law, shareholder rights may be fewer or less well defined than in other jurisdictions.
Our corporate affairs are governed by our by-laws and by Argentine corporate law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the States of Delaware or New York, or in other jurisdictions outside Argentina. In addition, your rights or the rights of holders of our Class B ordinary shares or ADSs to protect your or
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their interests in connection with actions by our Board of Directors may be fewer and less well defined under Argentine corporate law than under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets are not as highly regulated or supervised as the U.S. securities markets or markets in some other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well defined and enforced in Argentina than in the United States, putting holders of our Class B ordinary shares and ADSs at a potential disadvantage.
You may be unable to exercise voting rights with respect to the Class B ordinary shares underlying your ADSs at our shareholders' meetings.
As a holder of ADSs, we will not treat you as one of our shareholders and you will not have shareholder rights. The ADS Depositary will be the holder of the Class B ordinary shares underlying your ADSs and holders may exercise voting rights with respect to the Class B ordinary shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. There are no provisions under Argentine law or under our by-laws that limit the exercise by ADS holders of their voting rights through the ADS Depositary with respect to the underlying Class B ordinary shares. However, there are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. For example, holders of our Class B ordinary shares will receive notice of shareholders' meetings through publication of a notice in the Official Bulletin of the Province of Buenos Aires (Boletín Oficial de la Provincia de Buenos Aires), an Argentine newspaper of general circulation and the bulletin of the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires), pursuant to the delegation of powers by BYMA to the Buenos Aires Stock Exchange and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders, by comparison, will not receive notice directly from us. Instead, in accordance with the deposit agreement, we will provide the notice to the ADS Depositary. If we ask it to do so, the ADS Depositary will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the ADS Depositary as to voting the Class B ordinary shares represented by their ADSs. Due to these procedural steps involving the ADS Depositary, the process for exercising voting rights may take longer for ADS holders than for holders of Class B ordinary shares and Class B ordinary shares represented by ADSs may not be voted as you desire.
Non-Argentine companies or entities that own our Class B ordinary shares directly and not as ADSs may not be able to exercise their rights as shareholders unless they are registered in Argentina.
Under Argentine law, foreign companies or entities that own shares in an Argentine corporation are required to register with the corresponding Argentine public registry, in order to exercise certain shareholder political rights, including voting rights. If you own our Class B ordinary shares directly (rather than ADSs) and you are a non-Argentine company or entity and you are not registered with the corresponding Argentine public registry, your ability to exercise your rights as a holder of our Class B ordinary shares may be limited.
Holders of Class B ordinary shares may determine not to pay any dividends.
In accordance with the Argentine General Companies Law 19,550, as amended, which we refer to as the Argentine General Companies Law, after allocating at least 5% of our annual net earnings to constitute a mandatory legal reserve, we may pay dividends to shareholders out of net and realized profits, if any, as set forth in our audited consolidated combined financial statements prepared in accordance with IFRS. If this legal reserve is reduced for any reason by less than 5% of our annual net earnings, no dividends can be distributed until it is reinstated. The approval, amount and payment of
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dividends are subject to the approval by our shareholders at our annual ordinary shareholders' meeting. The approval of dividends requires the affirmative vote of a majority of the shareholders entitled to vote at the meeting. In addition, the Company has entered into certain loan agreements that include restrictions and requirements regarding payment of dividends and other distributions. See "Dividend PolicyContractual Limitations on Dividend Payments". As a result, we cannot assure you that we will be able to generate enough net and realized profits so as to pay dividends or that our shareholders will decide that dividends will be paid.
Our shareholders' ability to receive cash dividends may be limited.
Our shareholders' ability to receive cash dividends may be limited by the ability of the ADS Depositary to convert cash dividends paid in Pesos into U.S. Dollars. Under the terms of our deposit agreement with the ADS Depositary, to the extent that the ADS Depositary can in its judgment convert Pesos (or any other foreign currency) into U.S. Dollars on a reasonable basis and transfer the resulting U.S. Dollars to the United States, the ADS Depositary will promptly as practicable convert or cause to be converted all cash dividends received by it on the deposited securities into U.S. Dollars. If in the judgment of the ADS Depositary this conversion is not possible on a reasonable basis (including as a result of applicable Argentine laws, regulations and approval requirements), the ADS Depositary may distribute the foreign currency received by it or in its discretion hold such currency without investing it for the respective accounts of the owners entitled to receive the same. As a result, if the exchange rate fluctuates significantly during a time when the ADS Depositary cannot convert the foreign currency, you may lose some or all of the value of the dividend distribution.
Future restrictions on the movement of capital out of Argentina may impair your ability to receive dividends and distributions on, and the proceeds of any sale of, the Class B ordinary shares underlying the ADSs.
The federal government may in the future impose restrictions on the conversion of Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Argentina. Beginning in December 2001, the federal government implemented an unexpected number of monetary and foreign exchange control measuresseveral of which were de facto or informalthat included restrictions on the free disposition of funds deposited with banks and on the transfer of funds abroad, including dividends, without prior approval by the Central Bank. Although the transfer of funds abroad in order to pay dividends no longer requires Central Bank approval, restrictions on the movement of capital to and from Argentina such as the ones which previously existed could, if reinstated, impair or prevent the conversion of dividends, distributions, or the proceeds from any sale of Class B ordinary shares, as the case may be, from Pesos into U.S. Dollars and the remittance of the U.S. Dollars abroad. We cannot assure you that the federal government will not take similar measures in the future. In such a case, the ADS Depositary may hold the Pesos it cannot convert for the account of the ADS holders who have not been paid.
Payment of dividends and other amounts to non-residents has been limited in the past and may be limited again.
From 2011 until President Macri assumed office, the federal government increased controls limiting the possibility of transferring funds abroad. Furthermore, during the last few years under the Fernández de Kirchner administration, the Central Bank exercised a de facto prior approval power for certain foreign exchange transactions, such as dividend payments, capital reductions and payment for the importation of goods and services, irrespective of their amount. The Macri administration has removed most of these controls. Notwithstanding the measures recently adopted by the Macri administration, similar restrictions may be enacted in the future by the federal government or the Central Bank, which could have an adverse effect on the value of our Class B ordinary shares and the
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ADSs. Moreover, in such an event, restrictions on the transfers of funds abroad may impede your ability to receive dividend payments as a holder of ADSs.
You might be unable to exercise preemptive or accretion rights with respect to the Class B ordinary shares underlying your ADSs.
Under the Argentine General Companies Law, if we issue new Class B ordinary shares as part of a capital increase, our shareholders will generally have the right to subscribe for a proportional number of Class B ordinary shares to maintain their existing ownership percentage, which is known as preemptive rights. In addition, our shareholders are entitled to the right to subscribe for the unsubscribed Class B ordinary shares at the end of a preemptive rights offering, on a pro rata basis, which is known as accretion rights. You may not be able to exercise the preemptive or accretion rights relating to the Class B ordinary shares underlying your ADSs unless a registration statement under the Securities Act of 1933, which we refer to as the Securities Act, is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the Class B ordinary shares relating to these preemptive rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, you may receive only the net proceeds from the sale of your preemptive rights by the ADS Depositary or, if the preemptive rights cannot be sold, they will be allowed to lapse. As a result, U.S. holders of Class B ordinary shares or ADSs may suffer dilution of their interest in our Company upon future capital increases.
Changes in the Argentine tax laws may adversely affect our results of operations and the tax treatment of our Class B ordinary shares and/or the ADSs.
On September 23, 2013, Law No. 26,893, which amended the Income Tax Law, was enacted. According to the amendment, the sale, exchange or other transfer of shares and other securities is subject to tax at a rate of 15% on the net capital gain or 13.5% on the sale price at the seller's choice for Argentine resident individuals and foreign beneficiaries. Moreover, capital gains obtained by Argentine resident entities resulting from the sale, exchange or other form of disposition of the ordinary shares or ADSs (such as those resulting from participating in the U.S. offer) are taxed at a 35% rate. There is an exemption for Argentine resident individuals if certain requirements are met; however, there is no such exemption for Argentine entities or non-Argentine residents.
The sale of Class B ordinary shares or ADSs is subject to tax, but as of the date of this prospectus no regulations have been issued regarding the way to pay this tax or the deadline to do it or the tax returns to use when the sale exclusively involves non-Argentine parties, and no administrative or judicial rulings have clarified this dearth of regulation.
Therefore, holders of our Class B ordinary shares or the ADSs, are encouraged to consult their tax advisors as to the particular Argentine income tax consequences of owning our Class B ordinary shares or the ADSs. See "Dividend Policy" and "TaxationMaterial Argentine Tax Considerations".
We may be a passive foreign investment company for U.S. federal income tax purposes.
A non-U.S. corporation will be considered a passive foreign investment company, which we refer to as a PFIC, for U.S. federal income tax purposes in any taxable year in which 75% or more of its gross income is "passive income" or 50% or more of its assets constitute "passive assets." The determination as to whether a non-U.S. corporation is a PFIC is based upon the application of complex U.S. federal income tax rules (which are subject to differing interpretations), the composition of income and assets of the non-U.S. corporation from time to time and the nature of the activities performed by its officers and employees.
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Based upon our current and projected income, assets and activities, we do not expect to be considered a PFIC for our current taxable year or for future taxable years. However, because the determination of whether we are a PFIC will be based upon the composition of our income, assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that we will not be considered a PFIC for any taxable year.
If we are a PFIC for any taxable year during which a U.S. Holder, as defined in "TaxationMaterial U.S. Federal Income Tax Considerations", holds the ADSs or Class B ordinary shares, the U.S. Holder might be subject to increased U.S. federal income tax liability and to additional reporting obligations. See "TaxationMaterial U.S. Federal Income Tax ConsiderationsPassive Foreign Investment Company Rules". U.S. Holders are encouraged to consult their own tax advisors regarding the applicability of the PFIC rules to their purchase, ownership and disposition of the ADSs or Class B ordinary shares.
Our shareholders may be subject to liability for certain votes of their securities.
Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the purchase price of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders' votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to Argentine General Companies Law or our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders. As a result, we cannot assure you that some shareholders may not be held liable for damages or other expenses under the Argentine General Companies Law.
In the past we have conducted business with Cuba. As a result, we may be subject to potential investigations by US authorities or reputational risks associated with doing business with sanctioned countries, which may affect the price of our Class B shares.
In the past, we have engaged in sporadic export sales of agricultural products and primary food products to Cuba. For the fiscal year ended November 30, 2016, our sales to Cuba represented a negligible amount of our net sales for the period. Similarly, for the fiscal year ended November 30, 2016, the total amount of tonnes of agricultural products exported consisted of less than 0.3% of our total tonnes of agricultural products exported for such year. As we are not a U.S. company we may have sporadically conducted business with certain counterparties with which U.S. persons may be restricted or prohibited from conducting the same or similar business. As of the date of this prospectus, however, we are not actively pursuing or seeking to pursue commercial efforts with any country or other counterparty included in any sanctioned list.
The U.S. Treasury Department's Office of Foreign Assets Control, which we refer to as OFAC, administers and enforces economic and trade sanctions based on U.S. foreign policy against Cuba and certain other targeted foreign countries, and groups opposed to the Cuban regime may seek to exert pressure on companies doing business in Cuba. Although Cuba has been removed from the U.S. Department of State's list of state sponsors of terrorism, uncertainty remains over OFAC's enforcement of sanctions against Cuba and the impact the sanctions program will have on our operations, and ultimately the market price of our Class B ordinary shares, particularly if such activities grow in the future. In addition, certain U.S. states have enacted or may enact legislation regarding investments by state-owned investors, such as public employee pension funds and state university endowments, in companies that have business activities with Cuba such as our Company. As a result, such state-owned institutional investors may be subject to restrictions with respect to investments in companies such as ours, which could also adversely affect the market for our Class B ordinary shares.
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The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
Following the completion of the Global Offering, we will be required to comply with various regulatory and reporting requirements, including those required by the SEC and the CNV. Complying with these reporting and regulatory requirements will be time consuming, resulting in increased costs to us or other adverse consequences.
As a public company, we will be subject to the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act, as well as to the Argentine Capital Markets Law and CNV rules. These requirements may place a strain on our systems and resources. The Exchange Act applicable to us requires that we file annual and current reports with respect to our business and financial condition. Likewise, CNV rules require that we make annual and quarterly filings and that we comply with disclosure obligations including current reports. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our business, results of operations and financial condition.
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We expect to receive US$ million of net proceeds from the sale of ADSs and Class B ordinary shares by us in the Global Offering, after deducting the estimated underwriting discounts and commissions and estimated expenses incurred in connection with the Global Offering, based on an assumed offering price of US$ per ADS (based on the venta de divisas exchange rate of AR$ per US$1.00 reported by the Banco de la Nación Argentina on , 2017), which corresponds to the mid-point of the range set forth on the cover page of this prospectus. If the international underwriters fully exercise their over-allotment option, we expect to receive US$ million of net proceeds. An increase (decrease) of US$1.00 in the price per share of US$ would increase (decrease) the net proceeds in connection with the Global Offering by US$ million (assuming the over-allotment option is not exercised).
We will not receive any proceeds from the sale of ADSs or Class B ordinary shares by the selling shareholders.
We intend to use the net proceeds from the Global Offering for general corporate purposes.
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Our Dividend Policy
Under the Argentine General Companies Law, the declaration and payment of dividends, subject to compliance with applicable Argentine corporate law, is determined by the annual shareholders' meeting. The approval of dividends requires the affirmative vote of a majority of the shares entitled to vote at the meeting. Both our Class A and Class B ordinary shares are entitled to the same amount of dividends per share.
Dividends, if any, on our outstanding Class A ordinary shares and Class B ordinary shares will be proposed by our Board of Directors and subject to the approval of our shareholders. Even if our shareholders decide to distribute dividends, the form, frequency and amount of such dividends will depend upon our future operations and earnings investment plans, capital requirements and surplus, general financial condition, contractual restrictions and other factors our Board of Directors and shareholders may deem relevant.
In addition, the distribution of dividends may be limited by Argentine law, which permits the distribution of dividends only out of realized and net earnings (ganancias líquidas y realizadas) as set forth in our annual standalone financial statements presented in Pesos and approved by our shareholders, or consolidated special interim balance sheet in case of anticipated dividends.
Under the Argentine General Companies Law and our bylaws, we are required to allocate to our legal reserve 5% of our annual net earnings, plus or minus the results or prior years, until our legal reserve equals 20% of our then-outstanding share capital, which legal reserve is not available for distribution to shareholders. References to our bylaws are to our bylaws as adopted upon the effectiveness of the Global Offering. Additionally, our annual net income must be allocated in the following order:
According to the rules issued by the CNV, cash dividends must be paid to shareholders within 30 days of the resolution approving their distribution.
For the fiscal year ended November 30, 2014, 2015 and 2016 we paid dividends to our shareholders totaling AR$0, AR$16 million and AR$68 million, respectively.
Payment of Dividends
In general, Argentine foreign exchange regulations grant access to the foreign exchange market for the purchase of foreign currency to pay dividends abroad to foreign shareholders or to a ADS Depositary for the benefit of the foreign holders of ADSs, provided that the "Foreign Financial Debt Information Regime" established by Communiqué "A" 3602, as amended, has been complied with, as well as the "Direct Investment Information Regime" (Communiqué "A" 4237, as amended), if applicable. The shares underlying the ADSs are held in Argentina by Banco Santander Rio S.A., acting as the custodian agent for the ADS Depositary. The ADS Depositary will be the registered owner on the records of the registrar of our Class B ordinary shares and will act as the registrar of our ADSs. We will inform the Central Bank of the amount of our Class B ordinary shares held by foreign shareholders and the shares underlying the ADSs, and, therefore, should have access to the foreign
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exchange market to pay dividends with respect to our Class B ordinary shares or ADSs, subject to certain structural restrictions as described further in "Risk FactorsRisks Related to ADSs and our Class B Ordinary SharesFuture restrictions on the movement of capital out of Argentina may impair your ability to receive dividends and distributions on, and the proceeds of any sale of, the Class B ordinary shares underlying the ADSs". Pursuant to the deposit agreement, holders of ADSs will be entitled to receive dividends, if any, declared with respect to the underlying Class B ordinary shares represented by such ADSs to the same extent as the holders of the Class B ordinary shares.
Payments of cash dividends and distributions, if any, will be made in Pesos, although we reserve the right to pay in other currency. See "Risk FactorsRisks Related to the ADSs and our Class B Ordinary SharesHolders of Class B ordinary shares may determine not to pay any dividends". The ADS Depositary will convert such dividends received by the ADS Depositary in Pesos into U.S. Dollars and pay such amount to holders of ADSs, net of any dividend distribution fees, ADS Depositary fees and expenses, currency conversion expenses, taxes or governmental charges, if any. In the event that the ADS Depositary is unable to convert immediately the Argentine currency received as dividends into U.S. Dollars, the amount of U.S. Dollars payable to holders of ADSs may be adversely affected by depreciation of the Peso. See "Risk FactorsRisks Related to the ADSs and our Class B Ordinary SharesFuture restrictions on the movement of capital out of Argentina may impair your ability to receive dividends and distributions on, and the proceeds of any sale of, the Class B ordinary shares underlying the ADSs".
Contractual Limitations on Dividend Payments
Pursuant to several of our existing debt agreements, we are subject to various customary restrictions on the payment of dividends upon the occurrence of an event of default under such agreements or if such payment would otherwise be reasonably likely to result in an event of default. Similarly, both we and our subsidiaries are also prohibited from paying dividends in the event that we fail to comply with certain financial ratios and covenants. For a further description of the specific limitations on dividends set forth in our material debt agreements, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of OperationsIndebtedness".
The payment of cash dividends may be subject to additional tax considerations. For further information on the tax implications of dividend payments see "TaxationMaterial Argentine Tax ConsiderationsTaxation on Dividends".
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The following table sets forth our capitalization as of November 30, 2016 on an actual basis and as adjusted to give effect to the completion of the Global Offering. The adjustments are based on an assumed initial public offering price of US$ per ADS, which is the midpoint of the price range per ADS set forth on the cover of this prospectus. We expect to receive US$ million of net proceeds from the sale of ADSs and Class B ordinary shares by us in the Global Offering, after deducting the estimated underwriting discounts, commissions and expenses incurred in connection with the Global Offering, based on an assumed offering price of US$ per ADS (based on the venta de divisas exchange rate of AR$ per US$1.00 reported by the Banco de la Nación Argentina on , 2017), which corresponds to the mid-point of the range set forth on the cover page of this prospectus. We will not receive any proceeds from the sale of ADSs or Class B ordinary shares by the selling shareholders.
The table below should be read in conjunction with "Use of Proceeds", "Management's Discussion and Analysis of Financial Condition and Results of Operation" and the audited consolidated combined financial statements and related notes included elsewhere in this prospectus.
|
As of November 30, 2016 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Actual | As Adjusted(1) | Actual | As Adjusted(1) | |||||||||
|
(in thousands of Pesos) |
(in thousands of U.S. Dollars)(2) |
|||||||||||
Current borrowings |
|||||||||||||
Bank borrowings |
3,945,596 | 248,620 | |||||||||||
Discounted notes |
184,506 | 11,626 | |||||||||||
Obligations under finance leases |
14,623 | 921 | |||||||||||
Total current borrowings |
4,144,725 | 261,167 | |||||||||||
Non-current borrowings |
|||||||||||||
Bank borrowings |
6,208,904 | 391,235 | |||||||||||
Obligations under finance leases |
25,419 | 1,602 | |||||||||||
Total non-current borrowings |
6,234,323 | 392,837 | |||||||||||
Total borrowings |
10,379,048 | 654,004 | |||||||||||
Shareholders' equity |
|||||||||||||
Total equity |
5,499,720 | 346,548 | |||||||||||
| | | | | | | | | | | | | |
Total capitalization |
15,878,768 | 1,000,552 | |||||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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As of , 2017, our outstanding capital stock consisted of Class A ordinary shares and Class B ordinary shares. If you invest in our ADSs in this international offering, your ownership interest will be diluted to the extent of the difference between the offering price per ADS and the net book value per ADS upon the completion of this international offering. Dilution results from the fact that the per-ADS offering price of ADS in this international offering could be substantially in excess of the actual book value per ADS. As of November 30, 2016, we had a net tangible book value of AR$ million or AR$ per ordinary share or US$ per ADS. Net tangible book value per ordinary share represents the amount of our total tangible assets of AR$ million (total assets less intangible assets and deferred tax assets) less total liabilities of AR$ million, divided by the total number of our ordinary shares outstanding as of November 30, 2016.
Dilution of Shareholders' Interest After the International Offering
After giving effect to the sale of the ADSs offered by us in the international offering at the offering price of US$ per ADS and of the Class B ordinary shares offered by us in the Argentine offering at the offering price of AR$ per share and, after deducting the estimated underwriting discounts and commissions and expenses incurred in connection with the Global Offering, our net tangible book value estimated at November 30, 2016 would have been approximately US$ million, based on the venta de divisas exchange rate of AR$15.87 per US$1.00 reported by the Banco de la Nación Argentina for November 30, 2016, representing US$ per ordinary share and US$ per ADS. This represents an immediate increase in net tangible book value of US$ per ordinary share and US$ per ADS to existing shareholders and ADS holders, respectively, and an immediate dilution in tangible book value of US$ per ADS to purchasers of ADSs in the international offering. Dilution for this purpose represents the difference between the price per ordinary share paid by these purchasers and net tangible book value per ordinary share immediately after the completion of the international offering.
This dilution analysis assumes no exercise of preemptive and accretion rights by our minority shareholders and no exercise of the overallotment option granted to the international underwriters.
The following table is for illustrative purposes only:
|
Per Ordinary Share | Per ADS(1) | |||||
---|---|---|---|---|---|---|---|
|
AR$ |
US$ |
|||||
Offering price (per ordinary share/ADS) |
$ | ||||||
Net tangible value per ordinary share/ADS prior to the Global Offering |
$ | ||||||
Net tangible value per ordinary share/ADS attributable to existing shareholders |
$ | ||||||
Net tangible value per ordinary share/ADS after the Global Offering |
$ | ||||||
Dilution per ordinary share/ADS to new investors(2) |
$ | ||||||
Percentage of dilution in net tangible value per ordinary share/ADS(3) |
% | % |
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A US$1.00 increase (decrease) in the public offering price of US$ per ADS would increase (decrease) our net book value after the international offering by US$ million, the net book value per ADS after the international offering by US$ per ADS and the dilution in the net book value per ADS to investors in the international offering by US$ per ADS, assuming the number of Class B ordinary shares and the ADSs offered under the international offering and the Argentine offering, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and expenses incurred in connection with the Global Offering.
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EXCHANGE RATES AND EXCHANGE CONTROLS
A significant portion of our operating income is exposed to foreign exchange fluctuations. We are primarily exposed to fluctuation in the exchange rate between the U.S. Dollar and the Peso. See also "Management's Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures About Market RiskExchange Rate Risk".
Argentine Pesos
From April 1, 1991 until the end of 2001, Law No. 23,928 and Regulatory Decree No. 529/91, or the Convertibility Law, established a fixed exchange rate under which the Central Bank was obliged to sell U.S. Dollars at a fixed rate of one Peso per U.S. Dollar. On January 6, 2002, the Argentine Congress enacted Economic Emergency Law No. 25,561, or the Public Emergency Law, which suspended certain provisions of the Convertibility Law, including the fixed exchange rate of AR$1.00 to US$1.00, and granted the executive branch of the federal government the power to set the exchange rate between the Peso and foreign currencies and to issue regulations related to the Foreign Exchange Market. Following a brief period during which the federal government established a temporary dual exchange rate system, pursuant to the Public Emergency Law, the Peso was permitted to float freely against other currencies since February 2002. The Public Emergency Law was subsequently extended and remains in effect as of the date of this prospectus.
Since the suspension of some of the provisions of the Convertibility Law in December of 2001, the federal government has imposed several controls on the purchase of foreign currency in the exchange market, the transfer of funds outside of Argentina and the inflow of funds to Argentina.
Beginning in late 2011, the federal government began implementing measures that further restricted access to the Foreign Exchange Market, and set limitations on the purchase of foreign currency except in the case of specific and regulated transactions.
However, beginning in December 17, 2015, the federal government implemented a series of measures to progressively deregulate and implement more flexible rules for foreign exchange controls. The following amendments, along with certain other reforms, were introduced by communiqués including "A" 5850, "A" 5861, "A" 5899, "A" 6037, "A" 6058, "A" 6067, "A" 6137, "A" 6150 and "A" 6174 in each case as amended. We refer to these communiqués collectively as the New Regulation. Among other changes, these amendments revised the rules pertaining to the Acquisition of External Assets, Payments for Services and Goods, Financial Indebtedness and the Repatriation of Direct and Portfolio Investments.
Acquisition of External Assets
The New Regulation replaces the rules for accessing the Foreign Exchange Market with limitations on the purchase of external assets (which includes foreign currency) by Argentine residents. As a result:
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Non-cooperative countries or jurisdictions will be designated as such by the Financial Action Task Force (www.fatf-gafi.org). The identification of the foreign entity where the customer's account has been created and the account number must be recorded in the applicable exchange ticket;
Payments for Services, Goods, Interests and Dividends
In relation to payment for services, imports of goods, interests, dividends to non-Argentine resident shareholders and to the ADS Depositary for the benefit of any foreign holders of ADSs and non-financial non-manufactured assets, such as intellectual property, Communiqué "A" 6037 removes the obligation to justify, through the presentation of certain required documentation, each foreign exchange transaction. All foreign exchange operations carried out through authorized entities are processed automatically. In lieu of providing supporting documentation, the customer must file a sworn affidavit with each foreign exchange ticket, indicating the code which corresponds to the type of foreign exchange transaction being performed. Access to the Foreign Exchange Market for this purpose requires the presentation of an affidavit declaring compliance with the reporting regimes established by Communiqué "A" 3602 (as amended and supplemented) and Communiqué "A" 4237 (as amended and supplemented), as applicable.
Notwithstanding the above, as from February 1, 2013, Argentine residents are required to inform the AFIP of any payments of dividends and interest paid abroad through the Advance Statement of Cross-Border Payments (or Declaración Anticipada de Pagos al Exterior (DAPE).
Financial Indebtedness
As established by Communiqué "A" 6037, the New Regulation eliminated the requirement that the proceeds of any financial indebtedness incurred with a non-Argentine resident and transferred to a resident of Argentina be settled in the Foreign Exchange Market. The settlement of such funds in the Foreign Exchange Market is no longer necessary even if an Argentine resident intends to eventually access the foreign exchange market to purchase foreign currency as a means of repaying the principal and interest under such financial indebtedness. As per Resolution No. 1/2017 from the Ministry of Treasury (Ministerio de Hacienda), dated January 5, 2017, the previously applicable regulation establishing that any and all indebtedness actually transferred to Argentina and settled in the Foreign Exchange Market, had to have an agreed upon minimum term of 120 days (counted as from the date the funds are settled), was amended and such term reduced to zero days.
To access the Foreign Exchange Market for purposes of the repayment of principal, an affidavit stating that Argentina's financial debt information regime was duly complied with must be filed.
In addition, it is important to mention that the New Regulation removed the requirements for a 30% mandatory deposit, in connection with the inflow of certain funds to Argentina through the Foreign Exchange Market.
Repatriation of Direct and Portfolio Investments by Non-Argentine Residents
Argentine companies may also make payments of dividends to non-Argentine resident shareholders and to the ADS Depositary for the benefit of the foreign holders of ADSs in Pesos. The repatriation of such proceeds by foreign shareholders and/or the ADS Depositary for the benefit of the non-Argentine resident holders of ADSs is also permitted under foreign exchange regulations.
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The New Regulation establishes, that the repatriation of direct investments by a non-Argentine residents (i.e. the sale of a direct investment, liquidation of a direct investment, capital reduction or return of an irrevocable capital contribution) no longer requires the presentation of evidence showing the transfer of funds to Argentina by means of the Foreign Exchange Market or compliance with the prior minimum holding period of 365 calendar days from the date of transfer of the investment funds. The intervening financial entity however, must verify compliance with the "Direct Investment Information Regime" (Communiqué "A" 4237, as amended), if applicable.
For portfolio investments, the repatriation of funds by non-Argentine residents through the Foreign Exchange Market no longer requires that residents provide the intermediate financial entity with evidence that the investment funds were duly transferred through the Foreign Exchange Market and that a minimum waiting period of 120 days counted as from the date of transfer and settlement on the Foreign Exchange Market was met.
In addition, in order to repatriate both portfolio and direct investments, the non-Argentine resident must reside or be incorporated in a country, territory or jurisdiction considered to be "cooperative" in matters related to fiscal transparency.
The New Regulations have also removed the US$500,000 monthly limit for the repatriation of portfolio investments by non-Argentine residents.
Notwithstanding the above, on May 19, 2017, the Central Bank issued Communication "A" 6244, which will come into force on July 1, 2017, pursuant to which new regulations regarding access to the foreign exchange market were established, and thereby superseding all prior regulations on the matter. With this communication, the Central Bank continues to lift restrictions and deregulate access to the Foreign Exchange Market, eliminating all requirements for the transfer of funds to and from Argentina, except for the obligation of Argentine residents to (a) comply with the reporting regimes set forth by Communication "A" 3602 and Communication "A" 4237 of the Central Bank, and (b) transfer to Argentina and thereafter sell in the Foreign Exchange Market the proceeds of their exports of goods by the applicable deadline.
The existing controls and restrictions, and any additional restrictions of this kind that may be imposed in the future, could impair our ability to transfer funds generated by our Argentine operations in U.S. Dollars outside Argentina. See "Risk FactorsRisks Related to ArgentinaOur business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, including between the U.S. Dollar and the Peso" and "Risk FactorsRisks Related to the ADSs and our Class B Ordinary SharesFuture restrictions on the movement of capital out of Argentina may impair your ability to receive dividends and distributions on, and the proceeds of any sale of, the Class B ordinary shares underlying the ADSs".
The following table sets forth the high, low, average and period-end exchange rates for the periods indicated, expressed in Pesos per U.S. Dollar and not adjusted for inflation. There can be no assurance that the Peso will not further depreciate in the future. The exchange rates below should not be considered as representations that the Peso amounts have been or could be converted into U.S. Dollars
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at that rate or any other rate. The official venta de divisas exchange rate on November 30, 2016 was AR$15.87 to US$1.00.
|
Exchange Rate (Peso per U.S. Dollar) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
High(1) | Low(1) | Average(1) | Period End(1) | |||||||||
Year Ended November 30, |
|||||||||||||
2012 |
4.84 | 4.28 | 4.51 | 4.84 | |||||||||
2013 |
6.14 | 4.84 | 5.37 | 6.14 | |||||||||
2014 |
8.53 | 6.16 | 7.94 | 8.52 | |||||||||
2015 |
9.69 | 8.53 | 9.04 | 9.69 | |||||||||
2016 |
15.87 | 9.70 | 14.42 | 15.87 | |||||||||
Month Ended |
|||||||||||||
December 31, 2016 |
16.03 | 15.50 | 15.84 | 15.89 | |||||||||
January 31, 2017 |
16.08 | 15.81 | 15.91 | 15.90 | |||||||||
February 28, 2017 |
15.80 | 15.36 | 15.59 | 15.48 | |||||||||
March 31, 2017 |
15.65 | 15.39 | 15.52 | 15.39 | |||||||||
April 30, 2017 |
15.49 | 15.19 | 15.36 | 15.40 | |||||||||
May 31, 2017 |
16.19 | 15.29 | 15.72 | 16.10 | |||||||||
June 1 through June 2, 2017 |
16.06 | 16.00 | 16.03 | 16.00 |
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SELECTED CONSOLIDATED COMBINED FINANCIAL DATA
You should read the selected historical consolidated combined financial data presented below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Summary Consolidated Combined Financial Data" and our consolidated combined financial statements and related notes included elsewhere in this prospectus.
The selected historical consolidated combined financial information presented below under the captions "Consolidated Combined Statement of Comprehensive Income Data" and "Consolidated Combined Statement of Cash Flow Data" for the fiscal years ended November 30, 2014, 2015 and 2016 and the summary historical consolidated combined financial information presented below under the caption "Consolidated Combined Statements of Financial Position Data" as of December 1, 2013 and November 30, 2014, 2015 and 2016 have been derived from our audited consolidated combined financial statements included elsewhere in this prospectus.
We prepare our audited consolidated combined financial statements in accordance with IFRS as issued by the IASB. We applied IFRS for the first time for the fiscal year ended November 30, 2016 with a transition date of December 1, 2013. We have applied all IFRS issued by the IASB effective at the time of preparing our consolidated combined financial statements. We applied IFRS for the first time for our fiscal year ended November 30, 2016, which included comparative information for the fiscal years ended November 30, 2014 and 2015. The opening IFRS statement of financial position was prepared as of our transition date of December 1, 2013. Note 2 to our audited consolidated combined financial statements contains the details of our transition to IFRS and application of IFRS 1.
We have omitted from this prospectus selected consolidated combined financial data for the fiscal years ended November 30, 2012 and November 30, 2013. We have omitted this information because such information cannot be provided without unreasonable effort or expense in light of the following circumstances:
Solely for the convenience of the reader, we have translated certain Peso amounts into U.S. Dollars at the venta de divisas exchange rate reported by the Banco de la Nación Argentina for November 30, 2016, which was AR$15.87 for each US$1.00. We make no representation that the Peso
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or U.S. Dollar amounts actually represent or could have been or could be converted into U.S. Dollars at the rates indicated, at any particular rate or at all.
|
For the Year Ended November 30, |
For the Fiscal Year Ended November 30, |
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statements of Comprehensive Income Data |
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Net sales |
2,036,402 | 32,317,700 | 22,134,392 | 19,821,199 | |||||||||
Cost of sales |
(1,580,472 | ) | (25,082,087 | ) | (17,188,962 | ) | (15,667,852 | ) | |||||
| | | | | | | | | | | | | |
Margin Before Operating Expenses |
455,930 | 7,235,613 | 4,945,430 | 4,153,347 | |||||||||
| | | | | | | | | | | | | |
Selling expenses |
(278,417 | ) | (4,418,472 | ) | (3,546,987 | ) | (2,967,422 | ) | |||||
Administrative expenses |
(52,129 | ) | (827,287 | ) | (510,605 | ) | (443,732 | ) | |||||
Other operating income, net |
686 | 10,882 | 27,637 | 24,088 | |||||||||
| | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
126,070 | 2,000,736 | 915,475 | 766,281 | |||||||||
| | | | | | | | | | | | | |
Financial income |
20,380 | 323,429 | 230,221 | 267,655 | |||||||||
Financial costs |
(67,451 | ) | (1,070,446 | ) | (687,128 | ) | (506,041 | ) | |||||
Exchange differences, net |
(91,267 | ) | (1,448,401 | ) | (398,464 | ) | (311,690 | ) | |||||
| | | | | | | | | | | | | |
Financial results, net |
(138,338 | ) | (2,195,418 | ) | (855,371 | ) | (550,076 | ) | |||||
| | | | | | | | | | | | | |
Gain on acquisition of businesses |
68,326 | 1,084,327 | |||||||||||
| | | | | | | | | | | | | |
Profit Before Income Tax |
56,058 | 889,645 | 60,104 | 216,205 | |||||||||
| | | | | | | | | | | | | |
Income tax expense |
(1,592 | ) | (25,263 | ) | (48,173 | ) | (68,396 | ) | |||||
| | | | | | | | | | | | | |
Profit for the Year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | | |
Adjusted average number of ordinary shares outstanding |
150,000,000 | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
Profit per share attributable to equity holders (in Pesos or Dollars as the case may be) |
0.36 | 5.76 | 0.08 | 0.99 | |||||||||
OTHER COMPREHENSIVE INCOME |
|||||||||||||
Items that may be reclassified as profit or loss |
|||||||||||||
Exchange difference on translation of foreign operations |
11,055 | 175,444 | 19,564 | 71,072 | |||||||||
Items that will not be reclassified as profit or loss |
|||||||||||||
Revaluation of property, plants and equipment |
184,624 | 2,929,983 | 915,093 | 1,029,368 | |||||||||
Income tax expense |
(64,808 | ) | (1,028,497 | ) | (320,531 | ) | (360,525 | ) | |||||
| | | | | | | | | | | | | |
Total Other Comprehensive Income |
130,871 | 2,076,930 | 614,126 | 739,915 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total Comprehensive Income |
185,338 | 2,941,312 | 626,057 | 887,724 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
85
|
As of November 30, |
As of November 30, | As of December 1, |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statements of Financial Position Data |
2016(1) | 2016 | 2015 | 2014 | 2013 | |||||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|
|||||||||||||
ASSETS |
||||||||||||||||
Non-Current Assets |
||||||||||||||||
Property, plant and equipment, net |
738,161 | 11,714,621 | 5,348,675 | 4,160,354 | 2,639,214 | |||||||||||
Investment property, net |
3,434 | 54,494 | 72,626 | 70,337 | 577 | |||||||||||
Intangible assets, net |
7,213 | 114,471 | 14,359 | 15,820 | 9,957 | |||||||||||
Investments in associates |
| | | 653 | 443 | |||||||||||
Deferred income tax assets |
2,164 | 34,350 | 18,478 | 21,232 | 6,519 | |||||||||||
Other investments |
1 | 15 | 133 | 235 | 83 | |||||||||||
Other receivables, net |
22,671 | 359,790 | 78,569 | 61,313 | 101,996 | |||||||||||
Trade receivables, net |
| | 4,439 | | | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Assets |
773,645 | 12,277,741 | 5,537,279 | 4,329,944 | 2,758,789 | |||||||||||
| | | | | | | | | | | | | | | | |
Current Assets |
||||||||||||||||
Inventories |
156,943 | 2,490,685 | 1,538,785 | 1,292,022 | 832,855 | |||||||||||
Other receivables, net |
70,972 | 1,126,326 | 903,022 | 517,126 | 495,189 | |||||||||||
Trade receivables, net |
352,401 | 5,592,599 | 4,382,579 | 2,846,578 | 2,140,152 | |||||||||||
Other investments |
| | | 109 | 1,724 | |||||||||||
Financial assets at fair value |
| | 26,158 | 23,015 | 17,580 | |||||||||||
Derivatives |
19,859 | 315,164 | 211,321 | 158,633 | 69,471 | |||||||||||
Cash and cash equivalents |
239,109 | 3,794,667 | 943,731 | 1,121,351 | 865,445 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Assets |
839,284 | 13,319,441 | 8,005,596 | 5,958,834 | 4,422,416 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL ASSETS |
1,612,929 | 25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | |||||||||||
| | | | | | | | | | | | | | | | |
SHAREHOLDERS' EQUITY |
||||||||||||||||
Common stock |
756 | 12,000 | 12,000 | 12,000 | 12,000 | |||||||||||
Additional paid-in capital |
1,601 | 25,414 | 25,414 | 25,414 | 25,414 | |||||||||||
Reserves |
297,258 | 4,717,491 | 2,640,561 | 2,026,435 | 1,286,520 | |||||||||||
Retained earnings |
46,932 | 744,815 | 471,812 | 477,881 | 329,995 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL SHAREHOLDERS' EQUITY |
346,548 | 5,499,720 | 3,149,787 | 2,541,730 | 1,653,929 | |||||||||||
| | | | | | | | | | | | | | | | |
LIABILITIES |
||||||||||||||||
Non-Current Liabilities |
||||||||||||||||
Borrowings |
392,837 | 6,234,323 | 1,215,844 | 1,224,210 | 620,550 | |||||||||||
Deferred income tax liabilities |
173,097 | 2,747,057 | 1,251,968 | 982,175 | 643,322 | |||||||||||
Trade and other payables |
11,912 | 189,041 | 13,850 | 72,760 | 13,498 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Liabilities |
577,846 | 9,170,421 | 2,481,662 | 2,279,145 | 1,277,370 | |||||||||||
| | | | | | | | | | | | | | | | |
Current Liabilities |
||||||||||||||||
Borrowings |
261,167 | 4,144,725 | 3,898,992 | 2,128,053 | 2,235,964 | |||||||||||
Current income tax payable |
6,542 | 103,828 | 1,563 | 10,148 | 27,659 | |||||||||||
Provisions |
4,272 | 67,789 | 27,649 | 13,600 | 10,212 | |||||||||||
Derivatives |
73 | 1,154 | 1,365 | 27,479 | 1,310 | |||||||||||
Trade and other payables |
416,480 | 6,609,545 | 3,981,857 | 3,288,623 | 1,974,761 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Liabilities |
688,534 | 10,927,041 | 7,911,426 | 5,467,903 | 4,249,906 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES |
1,266,381 | 20,097,462 | 10,393,088 | 7,747,048 | 5,527,276 | |||||||||||
| | | | | | | | | | | | | | | | |
TOTAL EQUITY AND LIABILITIES |
1,612,929 | 25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | |||||||||||
| | | | | | | | | | | | | | | | |
86
|
For the Year Ended November 30, |
For the Fiscal Year Ended November 30, |
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Consolidated Combined Statement of Cash Flow Data |
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
|
(in thousands of Pesos) |
|
|||||||||
Change in cash and cash equivalents |
|||||||||||||
Cash and cash equivalents at beginning of year |
59,466 | 943,731 | 1,121,351 | 865,445 | |||||||||
Cash and cash equivalents at end of year |
239,109 | 3,794,667 | 943,731 | 1,121,351 | |||||||||
| | | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents |
179,643 | 2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | | |
Cash flows from operating activities: |
|||||||||||||
Profit for the year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
Income tax expense |
1,592 | 25,263 | 48,173 | 68,396 | |||||||||
Adjustments for: |
|||||||||||||
Depreciation |
16,729 | 265,496 | 172,574 | 120,190 | |||||||||
Amortization |
663 | 10,527 | 4,567 | 2,424 | |||||||||
Change in fair value adjustment in derivatives |
(6,557 | ) | (104,054 | ) | (78,803 | ) | (62,992 | ) | |||||
Provisions |
2,529 | 40,140 | 14,049 | 3,388 | |||||||||
Bad debt accrual |
1,906 | 30,251 | 1,261 | 13,906 | |||||||||
Results from sale of equity investments |
(272 | ) | (4,310 | ) | (13,875 | ) | | ||||||
Gain on acquisition of businesses |
(68,326 | ) | (1,084,327 | ) | | | |||||||
Results from sale of property, plant and equipment |
(143 | ) | (2,271 | ) | (4,852 | ) | (940 | ) | |||||
Net interest accrued |
47,071 | 747,017 | 456,907 | 238,386 | |||||||||
Net exchange differences accrued and not paid |
85,397 | 1,355,250 | 36,607 | 37,591 | |||||||||
Interest collected |
19,815 | 314,460 | 228,606 | 264,711 | |||||||||
Income tax paid |
(3,151 | ) | (50,014 | ) | (80,686 | ) | (54,544 | ) | |||||
Increase in Inventories |
(46,084 | ) | (731,347 | ) | (246,763 | ) | (459,167 | ) | |||||
Increase in Accounts receivable |
(107,757 | ) | (1,710,106 | ) | (1,943,592 | ) | (687,680 | ) | |||||
Increase in Accounts payable |
162,091 | 2,572,380 | 632,524 | 1,373,124 | |||||||||
Change in other operating assets and liabilities, net |
(740 | ) | (11,742 | ) | (49,608 | ) | (117,643 | ) | |||||
Net cash generated from (used in) operating activities |
159,231 | 2,526,995 | (810,980 | ) | 886,959 | ||||||||
| | | | | | | | | | | | | |
Investing activities |
|||||||||||||
Purchases of property, plant and equipment |
(80,960 | ) | (1,284,842 | ) | (419,393 | ) | (563,511 | ) | |||||
Purchases of investment property |
(384 | ) | (6,100 | ) | (2,468 | ) | (69,609 | ) | |||||
Purchases of intangible assets |
(156 | ) | (2,479 | ) | (3,129 | ) | (6,801 | ) | |||||
Sales of property plant and equipment |
1,365 | 21,670 | 17,653 | 36,423 | |||||||||
Acquisition of businesses |
(46,389 | ) | (736,190 | ) | | | |||||||
Sales of related companies |
2,716 | 43,095 | 14,573 | | |||||||||
Other investments |
| | (492 | ) | 507 | ||||||||
Net cash used in investing activities |
(123,809 | ) | (1,964,846 | ) | (393,256 | ) | (602,991 | ) | |||||
| | | | | | | | | | | | | |
Financing activities |
|||||||||||||
Loans paid |
(708,889 | ) | (11,250,069 | ) | (3,999,372 | ) | (3,553,332 | ) | |||||
Borrowings |
931,126 | 14,776,968 | 5,698,424 | 3,983,752 | |||||||||
Interest paid |
(65,869 | ) | (1,045,344 | ) | (655,479 | ) | (504,329 | ) | |||||
Effects of reorganization |
(19,540 | ) | (310,099 | ) | | 77 | |||||||
Dividends paid |
(4,675 | ) | (74,200 | ) | (16,200 | ) | | ||||||
Net cash generated from (used in) financing activities |
132,152 | 2,097,256 | 1,027,373 | (73,832 | ) | ||||||||
| | | | | | | | | | | | | |
Foreign exchange (losses) / gains on cash and cash equivalents |
12,069 | 191,531 | (757 | ) | 45,770 | ||||||||
Net increase / (decrease) in cash and cash equivalents |
179,643 | 2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | | |
Acquisition of property, plant and equipment by finance lease |
| | 2,971 | 2,414 | |||||||||
| | | | | | | | | | | | | |
Dividends declared not paid |
13,049 | 207,080 | 1,800 | | |||||||||
| | | | | | | | | | | | | |
Dividends declared per share |
0.12 | 1.88 | 0.12 | | |||||||||
| | | | | | | | | | | | | |
|
|||||||||||||
| | | | | | | | | | | | | |
87
Adjusted Segment EBITDA
The following tables set forth certain key financial and operational data for the fiscal years ended November 30, 2014, 2015 and 2016.
|
For the Fiscal Year Ended November 30, | |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2016(2) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Adjusted Segment EBITDA(1) Retail Products segment |
35,841 | 568,793 | 220,250 | 312,504 | |||||||||
Adjusted Segment EBITDA(1) Branded Industrial Products segment |
71,671 | 1,137,416 | 337,723 | 354,164 | |||||||||
Adjusted Segment EBITDA(1) Agro-services and Sustainable Sourcing segment |
35,951 | 570,550 | 534,643 | 222,227 | |||||||||
Adjusted Segment EBITDA Margin(3) Retail Products segment |
| 15.30 | % | 8.95 | % | 13.06 | % | ||||||
Adjusted Segment EBITDA Margin(3) Branded Industrial Products segment |
| 8.93 | % | 3.11 | % | 4.63 | % | ||||||
Adjusted Segment EBITDA Margin(3) Agro-services and Sustainable Sourcing segment |
| 2.45 | % | 3.72 | % | 1.48 | % |
Non-IFRS Measurements
Total Adjusted Segment EBITDA
The following table presents a reconciliation of Total Profit to Total Adjusted Segment EBITDA for each of the fiscal years indicated.
|
For the Fiscal Year Ended November 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|
||||||||||
Profit for the Year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | | |
Gain on acquisition of businesses |
(68,326 | ) | (1,084,327 | ) | | | |||||||
Depreciation & Amortization |
17,393 | 276,023 | 177,141 | 122,614 | |||||||||
Financial income |
(20,380 | ) | (323,429 | ) | (230,221 | ) | (267,655 | ) | |||||
Financial costs |
67,451 | 1,070,446 | 687,128 | 506,041 | |||||||||
Exchange differences, net |
91,267 | 1,448,401 | 398,464 | 311,690 | |||||||||
Income tax expense |
1,592 | 25,263 | 48,173 | 68,396 | |||||||||
Total Adjusted Segment EBITDA (unaudited) |
143,463 | 2,276,759 | 1,092,616 | 888,895 |
88
Net Debt to Total Adjusted Segment EBITDA
We use the ratio of Net Debt to Total Adjusted Segment EBITDA as one of our principal measures of capital management. We define Net Debt to Total Adjusted Segment EBITDA as the ratio of borrowings minus cash and cash equivalents to Total Adjusted Segment EBITDA. The table below shows a reconciliation of this non-IFRS financial measure to total borrowings as follows:
|
As of and for the Fiscal Year Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Borrowings |
10,379,048 | 5,114,836 | 3,352,263 | |||||||
Cash and cash equivalents |
3,794,667 | 943,731 | 1,121,351 | |||||||
| | | | | | | | | | |
Net debt (unaudited) |
6,584,381 | 4,171,105 | 2,230,912 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total Adjusted Segment EBITDA (unaudited) |
2,276,759 | 1,092,616 | 888,895 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net Debt / Total Adjusted Segment EBITDA (unaudited) |
2.89 | 3.82 | 2.51 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
89
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated combined financial statements included elsewhere in this prospectus, as well as the information presented under "Selected Consolidated Combined Financial Data". The following management's discussion and analysis of financial condition and results of operations discussion contains forward-looking statements; for more information regarding the risks, uncertainties and assumptions inherent in these forward-looking statements, see "Forward-Looking Statements".
Overview
We are a leading food company with consumer brands such as Cañuelas, Pureza, Florencia, San Agustín, 9 de Oro, Paseo and Mamá Cocina, in the vegetable oil, flour, biscuits, cookies and crackers, ready-mixed flours and bread crumb product categories. Our full line of consumer products includes over 600 products and approximately 700 stock keeping units, or SKUs, across seven different product categories. Our operations are supported by strategically located, modern, innovative and efficient production facilities, as well as an extensive sourcing network of farmers located throughout Argentina, one of the world's most productive agricultural areas.
We operate with the goal of adding value to agricultural products in which Argentina, our primary market and location of our principal sourcing activities, has natural competitive advantages. We achieve this through a history of continued expansion following a strategy of vertical integration. We benefit from having the largest milling capacity in Argentina, according to data from MAGyP, with an installed milling capacity of 3.13 million tonnes and, according to FAIM, we are the largest producer of wheat flour in Argentina in 2016, processing over 28.5% of the wheat in Argentina and, according to Euromonitor, we are the largest exporter of flour in Argentina, exporting 57.9% of the wheat total flour exported from Argentina in 2016.
We source our agricultural products primarily from a network of more than 8,000 farmers, to whom we sell a variety of goods and services to support their production activities primarily in exchange for their agricultural products. Our sourcing activities are conducted through 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers, covering a substantial portion of Argentina's productive agricultural areas, providing us access to large quantities of high quality agricultural products.
For the years ended November 30, 2016, 2015 and 2014, we had net sales of AR$32,318 million, AR$22,134 million, and AR$19,821 million, respectively, and Total Adjusted Segment EBITDA of AR$2,277 million, AR$1,092 million, and AR$889 million, respectively.
First Time Adoption of IFRS
Molino Cañuelas S.A.C.I.F.I.A. and the other entities participating in the Reorganization neither prepared nor reported a complete set of consolidated combined financial statements in the past. Historically, we have applied the Generally Accepted Accounting Principles, or GAAP, of Argentina, in preparing the individual financial statements of Molino Cañuelas S.A.C.I.F.I.A. However, we have recently transitioned to the International Financial Reporting Standards, or IFRS, of the International Accounting Standards Board, or IASB, and the interpretations of the International Financial Reporting Interpretations Committee, or IFRIC. We have applied IFRS for the first time in connection with our audited consolidated combined financial statements as of December 1, 2013 (transition date), November 30, 2014, 2015 and 2016 and for our three fiscal years then ended November 30, 2014, 2015 and 2016. Moreover, we have applied IFRS 1, as described below.
90
The application of IFRS 1 required that we adopt accounting policies based on the relevant IFRS standards and related interpretations effective at the reporting date applicable to our first annual IFRS consolidated combined financial statements, which as noted above were our audited consolidated combined financial statements. These accounting policies were applied as of the transition date to IFRS and throughout all periods presented in our audited consolidated combined financial statements. In accordance with IFRS 1, our assets and liabilities were recognized and measured in accordance with the IFRS standards and related interpretations required to be applied as of our transition date, i.e., as of December 1, 2013.
IFRS 1 also requires that an entity that is adopting IFRS for the first time explain the manner in which the transition from the applicable previous GAAP to IFRSs affected such entity's reported financial position, financial performance and cash flows. As the combined group of corporate and other entities participating in the Reorganization neither prepared nor reported a complete set of consolidated combined financial statements in the past, these reconciliations from previous GAAP to IFRS were not required to be set forth in our audited consolidated combined financial statements as part of our transition to IFRS.
We also note that, in accordance with IFRS 1, in certain places the presentation in our audited consolidated combined financial statements differentiates between current and non-current assets and liabilities. Assets and liabilities are regarded as current if they mature within one year or within our normal business cycle, or are considered as held for sale. See Note 2.1 to our audited consolidated combined financial statements for further details of our transition to IFRS and application of IFRS 1.
Presentation of Financial Information
As noted above, our audited consolidated combined financial statements have been prepared in accordance with IFRS. All IFRS issued by the IASB, effective at the time of preparing these audited consolidated combined financial statements have been applied. Our fiscal or financial year corresponds to the period from December 1 through November 30 of the following year. Our consolidated combined statements of comprehensive income, changes in equity, and cash flows include three comparative years and our consolidated combined statement of financial position include four comparative years including transition date. Our audited consolidated combined financial statements are expressed in Pesos.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying our accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the audited consolidated combined financial statements are disclosed in Note 4 to the audited consolidated combined financial statements and disclosed below under "Critical Accounting Policies".
The Reorganization
During the fiscal year ended November 30, 2016, and subsequent to the end of the fiscal year but prior to the effectiveness of the Global Offering, our principal shareholders elected to complete a reorganization of Molino Cañuelas S.A.C.I.F.I.A. and various other entities and assets under the common control of our principal shareholders in order to organize all of our operations under Molino Cañuelas S.A.C.I.F.I.A. We effected this reorganization through a series of acquisitions and related corporate transactions. We refer to this series of transactions as the Reorganization.
Our audited consolidated combined financial statements are presented on a combined basis after giving effect to the Reorganization. As described in note 1.3 of our audited consolidated combined financial statements, we have combined the following entities and businesses under common control using the predecessor accounting method: a portion of the port business of MOLCA S.A., Alimentos
91
Cañuelas Chile S.P.A., Cañuelas Chile S.P.A., Empresa de Alimentos Cañuelas S.R.L., Empresa de Servicios Molca S.R.L., Moinho Cañuelas Ltda., Molino Cañuelas S.A., Molinos Puntanos S.A., Megaseed S.A., Molino Americano S.A. (Argentina), Molinos Florencia S.A., the packaging business of Cañuelas Pack S.A., and the agro-services, sustainable sourcing and export business of Compañía Argentina de Granos S.A. As a result, the assets and liabilities to be incorporated were recognized at the book values recorded in the financials of the acquired entities as of the date of the legal acquisitions. For more information on the Reorganization and the consideration provided in connection therewith, see "BusinessOur Corporate Structure and the Reorganization".
As described elsewhere in the prospectus, any consideration given or received in relation to transactions are recognized directly in equity as withdrawals or contributions at the acquisition date. Several of the acquisitions conducted in connection with the Reorganization did not occur by the end of the fiscal year ended November 30, 2016, and, therefore, the impact of the Reorganization payments or consideration made after November 30, 2016 in connection with the Reorganization and the assets and liabilities transferred to us in connection therewith are not fully reflected in our consolidated combined statement of financial position and consolidated combined statements of equity as of and for the fiscal year ended November 30, 2016. As of November 30, 2016, the pending consideration for such transactions totaled AR$7,490 million. As a result, although the audited consolidated combined financial statements were prepared as though all of the acquisitions forming part of the Reorganization had taken place, the impact of certain payments or consideration made in connection with the Reorganization was not fully reflected in our consolidated combined statement of financial position and consolidated combined statements of equity as of and for the fiscal year ended November 30, 2016.
Treatment of Common Control Acquisitions as Part of the Reorganization
In the preparation of our audited consolidated combined financial statements, we have applied the predecessor accounting method in accordance with the rules on accounting for business combinations under common control in consolidated combined financial statements. This means that the assets and liabilities of the recently acquired businesses that are part of the Reorganization correspond to the historical amounts in the individual financial statements of the combined entities (i.e., their predecessor values). Businesses, in accordance with IFRS 3 Business Combinations, that were acquired or will be acquired or contributed to Molino Cañuelas S.A.C.I.F.I.A. are included in our audited consolidated combined financial statements for all periods presented adjusted so as to achieve uniformity of accounting policies. All balances from intercompany transactions were eliminated in connection with such acquisitions.
Basis for Carve-Out Preparation of Businesses of MOLCA S.A., Compañía Argentina de Granos S.A. and Cañuelas Pack S.A.
As noted in "BusinessOur Corporate Structure and the Reorganization", Molino Cañuelas S.A.C.I.F.I.A. acquired a portion of MOLCA S.A.'s commercial operations consisting of certain of MOLCA S.A.'s assets and activities related to the Las Palmas port operations. This acquisition did not, however, include the physical port facilities and other related real property belonging to MOLCA S.A. where this business is conducted. In addition, during the period covered by our audited consolidated combined financial statements, there was no formal lease or other occupancy arrangement between MOLCA S.A. (on the one hand) and the port business acquired by Molino Cañuelas S.A.C.I.F.I.A. as part of the Reorganization (on the other hand). Accordingly, in order to properly reflect all of the costs of doing business during the period covered by our audited consolidated combined financial statements, our audited consolidated combined income statement includes a charge that represents the cost that we would ordinarily have incurred for the use of MOLCA S.A.'s port facilities. This charge (shown as an operating lease payment in our audited consolidated combined financial statements) amounted to US$1.5 million per year, which is equal to the amount of the
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current, post-Reorganization contract entered into on December 21, 2015 between MOLCA S.A. and Molino Cañuelas S.A.C.I.F.I.A. relating to these facilities. For further information on this agreement, see "Related Party Transactions".
In addition, as noted in "BusinessOur Corporate Structure and Reorganization", Molino Cañuelas S.A.C.I.F.I.A. has acquired the agro-services, sustainable sourcing and export business of Compañıa Argentina de Granos S.A. and the packaging business of Cañuelas Pack S.A. However, the acquisition of the aforementioned business of Compañıa Argentina de Granos S.A. did not include certain assets and liabilities that Compañıa Argentina de Granos S.A. maintained. Nevertheless such assets and liabilities and their historic impact on profit or loss were reflected in our audited consolidated combined financial statements. Our combined statement of financial position as of November 30, 2016 does not reflect the consideration paid by us in connection with the Reorganization after November 30, 2016.
Trends and Factors Affecting Our Results of Operations
Our business, results of operations and financial condition have been influenced and will continue to be influenced by the macroeconomic environment and the factors described below. The below analysis should be read in conjunction with the discussion in "Risk Factors".
Effects of Foreign Currency Fluctuations
Due to our reliance on agricultural products priced in U.S. Dollars, our business, results of operations and financial condition have been and will continue to be affected by the volatility of the Peso against the U.S. Dollar. However, purchase and sale prices of the agricultural products that we buy and sell are denominated in U.S. Dollars or set to a price based on a U.S. Dollar-denominated market price. As a result, our business is naturally hedged against fluctuations in the exchange rate of the Peso against the U.S. Dollar. Moreover, we have historically been able to adjust the prices of our products over time to support the operating results of our business following movements in the price of agricultural products resulting from fluctuations in the value of the Peso versus the U.S. Dollar. Any foreign currency exposure that is not naturally hedged and is in excess of US$10 million requires the approval of our management. However, sharp movements in the prices of our inputs or the exchange rate of the Peso usually do have an impact in the results of our operations in the short term.
While the Macri administration has substantially removed previously existing exchange controls, due to the ongoing state of emergency laws in effect in Argentina described in "Exchange Rate and Exchange ControlsArgentine Pesos", there are potential government-mandated changes to the applicable Peso-U.S. Dollar exchange rate that, if not anticipated, may affect our outstanding U.S. Dollar-denominated borrowings. Future devaluations such as the devaluation in December of 2015 may alter the relationship between revenue in our Argentine Retail Products and Branded Industrial Products segments and the cost of our U.S. Dollar-denominated borrowings. Further, any depreciation and appreciation of other currencies relative to the Peso may result in volatility in earnings and cash flows from some of our subsidiaries, particularly those in Brazil. Future fluctuations in exchange rates relative to the U.S. Dollar may have a material effect on our earnings and cash flows. For a further description of some of the risks associated with foreign currency fluctuations, see "Risk FactorsRisks Related to ArgentinaOur business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, including between the U.S. Dollar and the Peso" and "Quantitative and Qualitative Disclosure About Market RiskExchange Rate Risk".
Seasonality
Our Agro-Services and Sustainable Sourcing segment, which represented 54% of our net sales to third parties for the fiscal year ended November 30, 2016, is subject to significant seasonal fluctuations
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as activity peaks during the harvest period, which runs from December through February for wheat, February to April for sunflower seeds and April through August for soybeans. During the planting season, which runs from June through August, demand from producers for fertilizer and other agro inputs related to their planting, increases the sales activity of our Agro-Services business line. This seasonality creates fluctuations in our inventory, farming products and services, usually peaking in May to cover sales between crop harvests (i.e., December through October), and a degree of seasonality in our cash flow, with cash flows significantly lower in the last quarter of the fiscal year. Because our agricultural product purchases are limited primarily to Argentina and Uruguay, our agricultural product inventory levels typically peak after the fall harvest in Argentina and are generally lower during the Argentine summer months. Our working capital requirements have historically trended with inventory levels of agricultural products we buy.
In addition, the net sales of our Retail Products segment, which represented 12% of our total net sales to third parties for the fiscal year ended November 30, 2016, are also subject to fluctuations in its cash flow due in part to the seasonal demand for certain of its business products. Our retail flour business line peaks from June through July with a trough in consumption in December and January. The difference between consumption in the peak and trough periods is approximately 30%. The flour business line in our Branded Industrial Products segment is subject to less volatility with the December through January period resulting in a 15% trough in sales. Therefore, as a result of fluctuation in our Retail Products, Branded Industrial Products and Agro-Services and Sustainable Sourcing segments, our cash flow has varied significantly from period to period during the course of the year, and is likely to continue to vary, due to seasonal factors. For further information on seasonality, see "Risk FactorsRisks Related to our BusinessOur business is seasonal, and our cash flow may fluctuate significantly depending on the crop growing cycle".
Agricultural Export Tariffs and Restrictions in Argentina
Following the economic and financial crisis experienced by Argentina in 2001-2002, the federal government increased export taxes on agricultural products, primarily in respect of soybeans and related derivatives. However, the current administration has recently eliminated or reduced export taxes on agricultural products. Wheat, sunflower seeds and corn were once subject to a 23.0%, 32.0% and 20% export tax, respectively, but these export taxes were abrogated in 2016. Soybeans are still subject to a 30.0% export tax, down from 35%. Export taxes for these agricultural products are required to be paid in advance of export and we receive payment for these in advance. The retail products and branded industrial products that we export are not subject to export taxes.
The direct impact of these export taxes on our results of operation is reduced because we generally pass along fluctuations in the cost of our agricultural product inputs to consumers. However, export taxes may have a direct impact on the volume of wheat and other agricultural products available to us for our business activities. As export tariffs are lowered, local agricultural product prices may increase as exports become more competitive. In addition, as recently as 2013, the federal government implemented restrictions on the export of wheat and soybeans. Such restrictions, if re-implemented in the future, may have a negative effect on the levels of agricultural production and may also impact the competitiveness of our sustainable sourcing and reselling operations. For more information on export taxes and export restrictions, please see "Risk FactorsRisks Related to ArgentinaAn increase in export and import duties and controls may have an adverse impact on our business". As local prices are determined taking into consideration the export parity reference, any increase in export taxes would negatively affect our business, results of operations and financial condition.
Effects of Fluctuations in the Prices of Agricultural Products
The purchase of agricultural products is the principal component of our cost of sales for the fiscal year ended November 30, 2016. Prices of agricultural products have historically experienced substantial
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fluctuations. For example, based on Chicago Board of Trade (CBOT) data, from December 1, 2014 through November 30, 2016, wheat prices in U.S. Dollars decreased by approximately 30%. Despite significant changes in the prices of agricultural products, the results of our operations are not significantly affected by price fluctuations. In our Agro-Services and Sustainable Sourcing segment, we match our purchases of agricultural products or exchanges of agricultural product inputs, farming goods and services for agricultural products with the price at which we are able to sell such agricultural products. In addition, in our Retail Products and Branded Industrial Products segments, we reevaluate prices on a weekly basis based upon the cost of relevant agricultural products or primary food product inputs and make price adjustments based upon the cost of agricultural products or primary food product inputs. As such, our input costs are largely offset by price changes in the prices at which we resell agricultural products or changes in the prices we charge to our Retail Products and Branded Industrial Products segments. For further information on the risks associated with the price of agricultural products, see "Risk FactorsRisks Related to Our BusinessPrice changes in the agricultural products and commodities we depend on for the production of primary food products may adversely affect our profitability".
Effects of Taxes on Our Income
We are subject to a variety of taxes on our results of operations. The following table shows the income tax rates in effect for 2014, 2015 and 2016 in each of the countries in which we operate:
|
Tax Rate (%) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
Argentina |
35.0 | % | 35.0 | % | 35.0 | % | ||||
Brazil |
34.0 | % | 34.0 | % | 34.0 | % | ||||
Bolivia |
25.0 | % | 25.0 | % | 25.0 | % | ||||
Chile |
24.0 | % | 22.5 | % | 21.0 | % | ||||
Uruguay |
25.0 | % | 25.0 | % | 25.0 | % |
We are subject to value-added taxes, sales taxes and certain provincial taxes. These taxes may be subject to significant changes that could affect our income and results of operation. In addition, sales taxes in Argentina create an incentive for vertical integration, which may encourage us to integrate any new processes or production into our existing operations. As a result of the fact that our Agro-Services and Sustainable Sourcing segment accepts payments in the form of agricultural products, some of our tax obligations in connection with these transactions may differ and result in more favorable treatment, including sales taxes.
In addition, our operations in Brazil are heavily influenced by local tax benefits conferred to flour mills. As a result, our Branded Industrial Products operations receive tax benefits in Brazil that corresponded to a 75% reduction in income tax in the fiscal year 2016. We also receive other subsidies and benefits in connection with new project investments and expansions. As a result, we are more likely to engage in certain investments in Brazil that would otherwise be less economically attractive but for the tax benefits. These benefits may also change the way in which we view the revenue generated by specific investments. For further information see, "Risk FactorsRisks Related to Latin AmericaWe are exposed to risks of operating and selling of our products in multiple countries in Latin America".
Inflation
Historically, inflation in Argentina has played a significant role in influencing the economic conditions in the country, and, in turn, the operations and financial results of companies operating in Argentina, such as us. High rates of inflation affect the comparability of financial performance and financial condition on a period-to-period basis. For more information on the risks associated with inflation, see "Risk FactorsRisks Related to ArgentinaContinuing inflation may have an adverse
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effect on the Argentine economy, and, as a consequence, on our business, results of operation and financial condition". On January 8, 2016, Decree No. 55/2016 was issued by the federal government declaring a state of administrative emergency on the national statistical system and on the INDEC, until December 31, 2016. INDEC ceased publishing statistical data until a rearrangement of its technical and administrative structure was finalized.
After the process of reorganization, on June 16, 2016, INDEC began releasing official measurements of its primary indication of inflation, the CPI. INDEC reported that the monthly CPI increase in 2016 was 4.2% in May, 3.1% in June, 2.0% in July, 0.2% in August, 1.1% in September, 2.4% in October, 1.6% in November and 1.2% in December. Further, the monthly CPI increases in 2017 were 1.3% in January, 2.5% in February, 2.4% in March and 2.6% in April. As of the date of this prospectus, the CPI for the first four months of 2016 has not been published. INDEC has also published IPIM figures for the for 2016, reporting monthly increases of 9.0% in January, 5.0% in February, 2.4% in March, 1.5% in April, 3.6% in May, 2.9% in June, 2.7% in July, 0.4% in August, 0.4% in September, 0.6% in October, 1.1% in November and 0.8% in December, respectively, and increases in 2017 of 1.5% in January and 1.7% in February, 0.9% in March and 0.5% in April. The IPIM rate for the year ended December 31, 2016 showed an annual increase of 34.5%.
For information on INDEC figures see "Risk FactorsRisks Related to ArgentinaContinuing inflation may have an adverse effect on the Argentine economy, and, as a consequence, on our business, results of operation and financial condition".
IAS 29, Financial Reporting in Hyperinflationary Economies, or IAS 29, requires that financial statements of any entity whose functional currency is the currency of a hyperinflationary economy, whether based on the historical cost method or on the current cost method, be stated in terms of the measuring unit current at the end of the reporting period. Even though the standard does not establish an absolute rate at which hyperinflation is deemed to arise hyperinflation is indicated by characteristics of the economic environment of a country. These characteristics include cumulative inflation for the last three years approaching or exceeding 100%. We have determined that currently the Peso does not qualify as a currency in a hyperinflationary economy according to the guidelines in IAS 29 whereby financial information recorded in a hyperinflationary currency is adjusted by applying a general price index and expressed in the measuring unit (the hyperinflationary currency) current at the end of the reporting period. Therefore, the financial statements included herein were not restated into constant currency. For further information, see "Presentation of Financial and Certain Other InformationInflation".
Macroeconomic and Political Developments in Emerging Markets
Our operating results and financial condition are directly impacted by macroeconomic and fiscal developments, including fluctuations in currency exchange rates, in those markets. In recent years, emerging markets have generally experienced significant macroeconomic and fiscal uncertainty due in part to fluctuations in the price of agricultural products. Similarly, the emerging markets in which we operate remain subject to political developments and uncertainties due in part to the active intervention of governmental authorities. For further information on these risks, see "Risk FactorsRisks Related to Argentina" and "Risk FactorsRisks Related to Latin America" and "BusinessBusiness SegmentsGeographic Sales".
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Effect of Material Investments and Acquisitions
The comparability of our results of operations is also affected by material investments in and completion of significant investments. Our results of operations for earlier periods that do not include the results of recently built facilities, such as our Spegazzini facility, may not be comparable to the results of a more recent period that reflects the results of such acquisition or investment. The construction of our Spegazzini facility required an approximately US$100 million investment and as a result, the financial performance of our business has been impacted by additional fixed costs that we expect will be gradually absorbed as sales of our biscuits, cookies and crackers and frozen food products business lines continue to ramp up. Similarly, we completed the Cargill Acquisition on August 30, 2016. For the fiscal year ended November 30, 2016, net sales generated by the assets acquired as part of the Cargill Acquisition contributed AR$570 million to our net sales and AR$96 million in Adjusted Segment EBITDA for our Branded Industrial Products segment. In addition as of the date of the Cargill Acquisition, many of the flour mills we acquired from Cargill were not operating at maximum capacity. For a further description of the Cargill Acquisition, see "Prospectus SummaryCargill Acquisition" and "Presentation of Financial and Certain Other InformationCargill Acquisition".
Our capital expenditures during the last three years consisted mainly of expenses related to (i) expanding and upgrading our production facilities, (ii) the Cargill Acquisition, and (iii) the construction of new manufacturing and storing facilities. Significant acquisitions and investments occurred throughout the fiscal years ended November 30, 2015 and 2016. These acquisitions affect mainly the comparability of our results of operations in the Retail Products, Branded Industrial Products and Agro-Services and Sustainable Sourcing segments. For a further description of ongoing or future investment plans, see "BusinessNew Projects and Investments".
Critical Accounting Policies
Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments, assumptions and estimates about matters that are inherently uncertain or where judgments, assumptions and estimates are significant. Our management bases its estimates on historical experience and other assumptions that it believes are reasonable based upon information available to us at the time that these judgments, assumptions and estimates are made. We continually evaluate our judgments, estimates and assumptions. Our actual results may differ from the judgments, assumptions and estimates made by our management. To the extent that there are material differences between these judgments, assumptions and estimates (on the one hand) and actual results (on the other hand), our future financial statement presentation, financial condition, results of operation and cash flows may be affected.
In order to provide an understanding regarding the manner in which our management forms its judgments about future events, including the variables underlying our judgments, estimates and assumptions, we summarize our critical accounting policies below.
Critical Judgments and Estimates Involved in the Preparation of our Audited Consolidated Combined Financial Statements
As part of the Reorganization, we have acquired businesses which were in certain cases part of larger entities. As such, in preparing our audited consolidated combined financial statements, we performed certain carve-out adjustments to reflect the historical financial performance of such acquired businesses in our audited consolidated combined financial statements. The carve-out adjustments required us to perform certain allocations and estimates which were based on the judgments and
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assumptions of our management. These carve-out adjustments involved subjective judgments as to the determination of reasonable methods of allocation.
Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our business, consolidated combined financial position, results of operations, or cash flows.
In particular, we estimated and assumed the allocation of assets and liabilities, revenues and costs, financial liabilities and related interest costs, and taxes as follows:
We applied the foregoing methods, assumptions, judgments and estimates on a consistent basis for all of the periods presented in the audited consolidated combined financial statements. It is possible that other companies, given the same information, may have reached different reasonable conclusions.
Carrying Value of Property, Plant and Equipment
We carry certain classes of property, plant and equipment under the revaluation model under "IAS 16Property, Plant and Equipment," which we refer to as IAS 16. The revaluation model requires us to carry property, plant and equipment at revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. IAS 16 requires us to carry out these revaluations with sufficient regularity so that the carrying amounts of our property, plant and equipment do not differ materially from that which would be determined using fair value at the end of a reporting period. The determination of fair value at the date of revaluation requires judgments, estimates and assumptions based on market conditions prevailing at the time of any such revaluation. Changes to any of our judgments, estimates, assumptions or market conditions subsequent to a revaluation could result in changes to the fair value of property, plant and equipment.
We prepare the corresponding revaluations on a regular basis taking into account the work of independent appraisers. We use different valuation techniques depending on the class of property being valued. Generally, we determine the fair value of our industrial buildings, warehouses, mills and facilities and grain storage facilities based on a depreciated replacement cost approach. We determine the fair value of our land based on current market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, we may use
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alternative valuation methods, such as recent prices on less current markets or discounted cash flow projections.
Property valuations is a significant area of estimation uncertainty. Valuation of property, plant and equipment is a central component of our business. Fair values are prepared regularly by us, taking into account independent valuations. The determination of fair value for the different classes of property, plant and equipment is sensitive to the selection of different significant assumptions and estimates. Changes in those significant assumptions and estimates could materially affect the determination of the revalued amounts of property, plant and equipment. We utilize historical experience, market information and other internal information to determine and/or review the appropriate revalued amounts.
The following are the most significant assumptions used in the preparation of the revalued amounts for our classes of property, plant and equipment:
We have not made any material changes to our valuation methodology, assumptions and estimates during the past three years.
Impairment Testing
We amortize or depreciate intangible assets with finite lives and property, plant and equipment over their estimated useful life on a straight line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. We have applied judgment in the identification of the indicators of impairment for property and
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equipment and intangible assets. We have determined that there were no indications of impairment for any of the periods presented in our audited consolidated combined financial statements. Accordingly, we have not estimated any recoverable values for our property, plant and equipment and finite life intangible assets.
As part of the Cargill Acquisition, we acquired a brand which we determined to have an indefinite useful life. The book value of this brand, which amounted to AR$65 million as of November 30, 2016, is not amortized to expense, instead it is tested for impairment at least annually. We perform our annual impairment analysis at the end of the fourth quarter. If events or indicators of impairment occur between annual impairment analyses, we perform an impairment analysis of the brand at that date. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant asset. In testing for a potential impairment of this brand, we (1) allocate the brand to our Branded Industrial Products segment to which the acquired brand relates; (2) estimate the recoverable value of the segment using a discounted cash flow model; (3) compare the recoverable value of the segment to its carrying value; and (4) if the estimated recoverable value of the segment is less than the carrying value, we must reduce the carrying amount of our segment to its estimated recoverable amount, and (5) allocate the reduction or impairment loss to the assets in the segment.
The process of evaluating the potential impairment of our brand is subjective and requires significant judgment at many points during the analysis, including the identification of our segment, identification and allocation of the assets and liabilities to the segment and determination of its recoverable value. In estimating the recoverable value of the segment for the purposes of our annual or periodic impairment analyses, we make estimates and significant judgments about the future cash flows of that segment. Our cash flow forecasts are based on assumptions that represent the highest and best use for our segment.
We employ a discounted cash flow model to estimate the value in use of the segment. This model requires the use of significant estimates and assumptions regarding future revenues, costs, margins, terminal year growth rate and cost of capital. Our cash flow models are based on our forecasted results for a period of 5 years. Actual results could differ from our projections. Some assumptions, such as future revenues and costs are company driven and could be affected by a loss of one or more significant contracts or customers; failure to control costs on certain contracts or a decline in demand based on changing economic or regulatory conditions. Changes in external market conditions may affect certain other assumptions, such as the cost of our capital. Market conditions can be volatile and are outside of our control.
The net cash inflows are discounted at a rate equivalent to the weighted average cost of capital adjusted by an appropriate risk factor. The terminal year growth rate applied for impairment testing in 2016 and the capital cost factors used to discount the expected cash flows are shown in the following table:
Variable
|
% | |||
---|---|---|---|---|
Terminal year growth rate |
2 | |||
Weighted average cost of capital |
10.5 |
We completed our annual review of indefinite life intangible assets for the year ended November 30, 2016, which indicated that we had no impairment of the brand.
Although we believe that the assumptions and estimates utilized are appropriate based on information available to management, changes in assumptions or circumstances could require changes in the analysis. Adverse changes in the assumptions utilized within our indefinite lived intangible asset impairment test could cause a reduction or elimination of excess fair value over carrying value, resulting in potential recognition of impairment.
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The sensitivity analysis for the cash-generating unit to which the brand was allocated was based on a 5% increase in the weighted average cost of capital or a 10% reduction in the long-term growth rate. We concluded that no impairment loss would need to be recognized on the brand in the segment under these conditions.
Income Taxes
We make significant estimates in determining both current and deferred tax liabilities and assets, not least in respect of the value of deferred tax assets. Current tax is provided at the amounts expected to be paid, and deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized, based on management's assumptions relating to the amounts and timing of future taxable profits. We must then determine the possibility that deferred tax assets will be utilized and offset against future taxable profits. The actual results may differ from these estimates, for instance due to changes in the business climate, changed tax legislation, or the outcome of the final review by tax authorities and tax courts of tax returns.
As of the end of November 30, 2016, we recognized deferred tax assets of AR$359 million. A change in the estimate of the possibility for utilization thus can affect results both positively and negatively.
The amount of income tax we pay is subject to evaluation of assessment proceedings by income tax authorities, which may result in adjustments to our carried forward tax losses. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, tax examinations are closed or when statutes of limitation on potential assessments expire. As a result, our effective tax rate may fluctuate significantly.
For the fiscal year ended November 30, 2016 our effective tax rate was 11.3% attributable primarily due to the fact that the 1,380% increase in profit before income tax for the fiscal year ended November 30, 2016 was primarily attributable to one-time non-taxable income resulting from profit from a business combination and a deduction of the exchange rate difference generated from non-current borrowing.
Factors affecting the tax charge in future years are principally a devaluation in subsidiaries with the U.S. dollar as a functional currency, an increase in non-taxable income and related expenses or any gain on acquisition of businesses.
Business CombinationsPurchase Price Allocation
We account for business combinations under the provisions of International Financial Reporting Standard 3 Business Combinations, or IFRS 3, which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values, with some exceptions. Non-controlling interests can be measured at either fair value or the present ownership interests' proportionate share of the acquiree's net identifiable assets. IFRS 3 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Otherwise, a gain on bargain purchase occurs where the consideration, the non-controlling interest and the previously held interest are less than the fair value of the net identifiable assets. A bargain purchase represents an economic gain, which should be immediately
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recognized in profit or loss. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.
As noted elsewhere in this prospectus, we completed the Cargill Acquisition on August 31, 2016. The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using all available information to make these fair value determinations, including independent appraisals.. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted back to a present value. The discounted cash flow valuation method requires the use of assumptions, the most significant of which include: future revenue growth, future earnings before interest, depreciation and amortization, terminal value growth rate, weighted average cost of capital and discount rate.
The estimated fair value of identifiable intangible assets, consisting of customer relationships and brands acquired were determined using the income approach method and relief of royalty method, respectively. The Cargill Acquisition resulted in the recognition of a bargain purchase gain of AR$1,084 million.
The income approach method used to value customer relationships requires the use of assumptions, the most significant of which include: the remaining useful life, expected revenue, survivor curve, earnings before interest and tax margins, marginal tax rate, contributory asset charges, weighted average cost of capital and discount rate.
The most significant assumptions under the relief of royalty method used to value brands include: estimated remaining useful life, expected revenue, royalty rate, tax rate, weighted average cost of capital and discount rate.
We have developed these assumptions on the basis of historical knowledge of the business and projected financial information of us. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.
The sensitivity analysis for the discounted cash flows was based on a 10% reduction in future cash flows, a 5% increase in the discount rate or a 10% reduction in the long-term growth rate. Those increases/decreases in isolation would have decreased the amount of the bargain purchase gain by AR$80 million, AR$140 million and AR$40 million, respectively.
Segment Information and Non-IFRS Financial Measures
Our Operating Segments
IFRS 8 "Operating Segments" requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The amount reported for each segment item is the measure reported to the chief operating decision maker for these purposes.
We have three reportable operating segments, which are organized based upon similar economic characteristics and are similar in nature of products offered and production processes, the type and class of customer and distribution methods, as follows:
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products under, among others, the following recognized brands in Argentina: 9 de Oro, Pureza, Cañuelas, Mamá Cocina, Multiple, Broche de Oro, Florencia, San Agustín, Cukis and Paseo, among others, and also under our more recently launched brands such as Pizza Pietro and Horno Casero. We manufacture our retail products in our own production facilities, including our recently completed Spegazzini facility. We sell our retail products to consumers in Argentina and the region through a variety of distribution channels, including large supermarkets (such as Walmart, Carrefour and Cencosud), wholesalers and other third-party distributors, supplemented by smaller points of sale, including gas stations (such as those owned by Shell and YPF), convenience stores and fast food restaurants (such as McDonald's and Subway). We also produce white label versions of several of our retail products, including flour and vegetable oil, which we sell to key customers as a strategy to deepen our distribution relationship and as an important source of production volume. Our distribution network is organized around the geographical position of our production facilities. Our retail mass market sales teams are organized in two teams, one for our dry products and one for our frozen food products line. We constantly seek to expand our distribution reach by introducing new formats like our Puntos Caliente for the baking of frozen food product lines, our food service operations offering sales of ready to consume products for convenience stores, fast food establishments and restaurants such as our recently opened Pizza Alla Pala restaurant in Buenos Aires. For the fiscal year ended November 30, 2016, our Retail Products segment generated AR$3,718 million (US$234 million) in net sales or 12% of our net sales to third parties and AR$569 million (US$36 million) of Adjusted Segment EBITDA or 25% of our Total Adjusted Segment EBITDA.
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our business as a reliable source of product demand and services for them while fostering a long-term relationship that gives us access to the quality and volume we need to support our food production operations. We foster and preserve direct contact and strong relationships with farmers through our agro-services business which acts as a one-stop supplier for farmers in our network providing a variety of products and services, including agricultural supplies such as seeds, fertilizers, farm machinery, insurance brokerage and other goods, in exchange for agricultural products. As of the date of this prospectus, we operate 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers located across ten provinces in Argentina offering convenience to farmers and ready access to us to a substantial portion of Argentina's productive agricultural area for our sourcing business. We also offer drying, storage and conditioning services to our farmers through our 21 conditioning and storage centers which facilitate the geographic distribution of our sourcing operations. In addition to sourcing for our own production, we also export a significant portion of our agricultural goods to ensure economies of scale, which when taken together gives us sufficient purchasing power to the farmers we work with and allows us to take advantage of market opportunities for our operations abroad. We also operate our own port, which is located in Las Palmas on the right bank of the Paraná River in northeastern Argentina and offers significantly reduced travel times on the Paraná River, thereby offering a significant competitive advantage as compared to ports further upstream. Our infrastructure at the Las Palmas port includes both handling and port elevation facilities. We expect to continue to use the Las Palmas port to further increase our exports of milled products into Brazil and other countries in the region. We are also planning the development of an industrial park in Argentina, which we refer to as the Five Nations Industrial Park, next to the Las Palmas port, through which we will seek to attract businesses, such as other consumer food product producers that may benefit from the competitive advantages created by our sourcing operations, food product manufacturing capability and logistical ease of distribution in Argentina through our agro-services and sustainable sourcing network, along with distribution agreements with retailers and exports through the Las Palmas port. For further information, see "BusinessNew Projects and InvestmentsFive Nations Industrial Park". For the fiscal year ended November 30, 2016, our Agro-Services and Sustainable Sourcing segment generated AR$23,284 million (US$1,467 million) of which $17,318 million, or 54% of our total net sales, consisted of net sales to third parties and AR$571 million (US$36 million) or 25% of our Total Adjusted Segment EBITDA.
For further information on our operating segments, see Note 5 to our audited consolidated combined financial statements and "Business".
Although Adjusted Segment EBITDA is commonly viewed as a non-IFRS measure in other contexts, pursuant to IFRS 8, Adjusted Segment EBITDA is treated as an IFRS measure in the manner in which we utilize this measure. We use Adjusted Segment EBITDA for purposes of making decisions about allocating resources to our segments and to internally evaluate their financial performance because we believe it reflects current core operating performance and provides an indicator of the segment's ability to generate cash.
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For the fiscal year ended November 30, 2016 |
Agro-services and sustainable sourcing |
Branded industrial products |
Retail products |
Elimination of intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to third parties |
17,318,513 | 11,281,549 | 3,717,638 | | 32,317,700 | |||||||||||
Intersegment sales |
5,965,898 | 1,456,850 | | (7,422,748 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
23,284,411 | 12,738,399 | 3,717,638 | (7,422,748 | ) | 32,317,700 | ||||||||||
Cost of sales |
(21,457,948 | ) | (8,728,087 | ) | (2,318,800 | ) | 7,422,748 | (25,082,087 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,826,463 | 4,010,312 | 1,398,838 | | 7,235,613 | |||||||||||
Selling expenses |
(1,117,284 | ) | (2,763,449 | ) | (537,739 | ) | | (4,418,472 | ) | |||||||
Administrative expenses |
(179,328 | ) | (305,340 | ) | (342,619 | ) | | (827,287 | ) | |||||||
Other operating income, net |
282 | 10,600 | | | 10,882 | |||||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
530,133 | 952,123 | 518,480 | | 2,000,736 | |||||||||||
Depreciation and amortization |
40,417 | 185,293 | 50,313 | | 276,023 | |||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
570,550 | 1,137,416 | 568,793 | | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
1,079,546 | 967,602 | 443,537 | | 2,490,685 | |||||||||||
Property, plant and equipment |
1,651,868 | 5,652,299 | 4,410,454 | | 11,714,621 | |||||||||||
Intangible assets |
4,882 | 109,589 | | | 114,471 | |||||||||||
| | | | | | | | | | | | | | | | |
Total |
2,736,296 | 6,729,490 | 4,853,991 | | 14,319,777 | |||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
For the fiscal year ended November 30, 2015 |
Agro-services and sustainable sourcing |
Branded industrial products |
Retail Products |
Elimination of intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to third parties |
9,639,881 | 10,033,966 | 2,460,545 | | 22,134,392 | |||||||||||
Intersegment sales |
4,750,189 | 816,265 | | (5,566,454 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
14,390,070 | 10,850,231 | 2,460,545 | (5,566,454 | ) | 22,134,392 | ||||||||||
Cost of sales |
(12,984,014 | ) | (8,003,631 | ) | (1,767,771 | ) | 5,566,454 | (17,188,962 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,406,056 | 2,846,600 | 692,774 | | 4,945,430 | |||||||||||
Selling expenses |
(812,502 | ) | (2,327,954 | ) | (406,531 | ) | | (3,546,987 | ) | |||||||
Administrative expenses |
(89,912 | ) | (272,404 | ) | (148,289 | ) | | (510,605 | ) | |||||||
Other operating income, net |
4,254 | 20,861 | 2,522 | | 27,637 | |||||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
507,896 | 267,103 | 140,476 | | 915,475 | |||||||||||
Depreciation and amortization |
26,747 | 70,620 | 79,774 | | 177,141 | |||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
534,643 | 337,723 | 220,250 | | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
579,725 | 565,851 | 393,209 | | 1,538,785 | |||||||||||
Property, plant and equipment |
924,709 | 2,116,647 | 2,307,319 | | 5,348,675 | |||||||||||
Intangible assets |
5,473 | 3,764 | 5,122 | | 14,359 | |||||||||||
| | | | | | | | | | | | | | | | |
Total |
1,509,907 | 2,686,262 | 2,705,650 | | 6,901,819 | |||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
105
For the fiscal year ended November 30, 2014 |
Agro-services and sustainable sourcing |
Branded industrial products |
Retail products |
Elimination of intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to third parties |
10,699,570 | 6,729,027 | 2,392,602 | | 19,821,199 | |||||||||||
Intersegment sales |
4,291,820 | 923,128 | | (5,214,948 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
14,991,390 | 7,652,155 | 2,392,602 | (5,214,948 | ) | 19,821,199 | ||||||||||
Cost of sales |
(13,556,686 | ) | (5,666,905 | ) | (1,659,209 | ) | 5,214,948 | (15,667,852 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,434,704 | 1,985,250 | 733,393 | | 4,153,347 | |||||||||||
Selling expenses |
(1,170,560 | ) | (1,464,123 | ) | (332,739 | ) | | (2,967,422 | ) | |||||||
Administrative expenses |
(69,412 | ) | (240,839 | ) | (133,481 | ) | | (443,732 | ) | |||||||
Other operating income, net |
(788 | ) | 24,886 | (10 | ) | | 24,088 | |||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
193,944 | 305,174 | 267,163 | | 766,281 | |||||||||||
Depreciation and amortization |
28,283 | 48,990 | 45,341 | | 122,614 | |||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
222,227 | 354,164 | 312,504 | | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
460,452 | 575,128 | 256,442 | | 1,292,022 | |||||||||||
Property, plant and equipment |
854,307 | 1,672,166 | 1,633,881 | | 4,160,354 | |||||||||||
Intangible assets |
4,448 | 4,910 | 6,462 | | 15,820 | |||||||||||
Total |
1,319,207 | 2,252,204 | 1,896,785 | 5,468,196 |
Non-IFRS Financial Measures
In addition to our financial information presented in accordance with IFRS, we use certain "non-IFRS financial measures" described below to evaluate the operating and financial performance of our business, identify trends affecting our business, develop projections, make strategic business decisions and evaluate our objectives, policies and processes for managing capital. Generally, a non-IFRS financial measure is a numerical measure of a company's operating performance or financial position that includes or excludes amounts that are included or excluded from the most directly comparable measure calculated and presented in accordance with IFRS. We monitor the non-IFRS financial measures described below, and we believe they are helpful to our management and to investors, because we believe they reflect the operating performance of our business.
Our non-IFRS financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-IFRS financial measures differently. In addition, there are limitations in using non-IFRS financial measures because they are not prepared in accordance with IFRS. The presentation of non-IFRS financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with IFRS. Finally, none of the non-IFRS measures are intended to be a substitute for, or superior to, IFRS measurements. We urge you to review the reconciliations of our non-IFRS financial measures to the comparable IFRS financial measures included below, and not to rely on any single financial measure to evaluate our business. See "Presentation of Financial and Certain Other InformationNon-IFRS Information" elsewhere in this prospectus for further information.
Our management believes Total Adjusted Segment EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.
106
We also utilize Net Debt and certain ratios derived or incorporating Net Debt, such as Net Debt to Total Adjusted Segment EBITDA to evaluate our objectives, policies and processes for managing capital. Both Total Adjusted Segment EBITDA and Net Debt are considered non-IFRS financial measures.
Total Adjusted Segment EBITDA
The following table shows a reconciliation of profit for the year to Total Adjusted Segment EBITDA for the periods presented:
|
For the Fiscal Year Ended November 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2016(1) | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Profit for the Year |
54,466 | 864,382 | 11,931 | 147,809 | |||||||||
Gain on acquisition of businesses |
(68,326 | ) | (1,084,327 | ) | | | |||||||
Depreciation & Amortization |
17,393 | 276,023 | 177,141 | 122,614 | |||||||||
Financial income |
(20,380 | ) | (323,429 | ) | (230,221 | ) | (267,655 | ) | |||||
Financial costs |
67,451 | 1,070,446 | 687,128 | 506,041 | |||||||||
Exchange differences, net |
91,267 | 1,448,401 | 398,464 | 311,690 | |||||||||
Income tax expense |
1,592 | 25,263 | 48,173 | 68,396 | |||||||||
Total Adjusted Segment EBITDA (unaudited) |
143,463 | 2,276,759 | 1,092,616 | 888,895 |
Net Debt to Total Adjusted Segment EBITDA
We use the ratio of Net Debt to Total Adjusted Segment EBITDA as one of our principal measures of capital management. We define Net Debt as the ratio of borrowings minus cash and cash equivalents to Total Adjusted Segment EBITDA. The table below shows a reconciliation of this non-IFRS financial measure to total borrowings as follows:
|
For the Fiscal Year Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Borrowings |
10,379,048 | 5,114,836 | 3,352,263 | |||||||
Cash and cash equivalents |
3,794,667 | 943,731 | 1,121,351 | |||||||
Net debt (unaudited) |
6,584,381 | 4,171,105 | 2,230,912 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total Adjusted Segment EBITDA (unaudited) |
2,276,759 | 1,092,616 | 888,895 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net debt / Total Adjusted Segment EBITDA (unaudited) |
2.89 | 3.82 | 2.51 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net Debt is not intended to be a substitute for, or superior to, IFRS measurements of Borrowings. For a further explanation of how management undertakes capital management policies, see "Capital Management and Funding Policies".
Results of Operations
The following tables show our income statement data for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. In the
107
following discussion, references to increases or decreases in any period are made by comparison with the prior period, except as the context otherwise indicated.
|
For the Fiscal Year Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Net sales |
32,317,700 | 22,134,392 | 19,821,199 | |||||||
Cost of sales |
(25,082,087 | ) | (17,188,962 | ) | (15,667,852 | ) | ||||
| | | | | | | | | | |
Margin Before Operating Expenses |
7,235,613 | 4,945,430 | 4,153,347 | |||||||
Selling expenses |
(4,418,472 | ) | (3,546,987 | ) | (2,967,422 | ) | ||||
Administrative expenses |
(827,287 | ) | (510,605 | ) | (443,732 | ) | ||||
Other operating income, net |
10,882 | 27,637 | 24,088 | |||||||
| | | | | | | | | | |
Results from Operations Before Financing and Taxation |
2,000,736 | 915,475 | 766,281 | |||||||
Financial income |
323,429 | 230,221 | 267,655 | |||||||
Financial costs |
(1,070,446 | ) | (687,128 | ) | (506,041 | ) | ||||
Exchange differences, net |
(1,448,401 | ) | (398,464 | ) | (311,690 | ) | ||||
| | | | | | | | | | |
Financial results, net |
(2,195,418 | ) | (855,371 | ) | (550,076 | ) | ||||
Gain on acquisition of businesses |
1,084,327 | | | |||||||
| | | | | | | | | | |
Profit Before Income Tax |
889,645 | 60,104 | 216,205 | |||||||
Income tax expense |
(25,263 | ) | (48,173 | ) | (68,396 | ) | ||||
| | | | | | | | | | |
Profit for the Year |
864,382 | 11,931 | 147,809 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Fiscal year ended November 30, 2016 compared to fiscal year ended November 30, 2015
The following table sets forth certain financial information with respect to our consolidated results of operation for the periods presented.
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Net sales |
32,317,700 | 22,134,392 | 46 | % | ||||||
Cost of sales |
(25,082,087 | ) | (17,188,962 | ) | 46 | % | ||||
| | | | | | | | | | |
Margin Before Operating Expenses |
7,235,613 | 4,945,430 | 46 | % | ||||||
Selling expenses |
(4,418,472 | ) | (3,546,987 | ) | 25 | % | ||||
Administrative expenses |
(827,287 | ) | (510,605 | ) | 62 | % | ||||
Other operating income, net |
10,882 | 27,637 | (61 | )% | ||||||
| | | | | | | | | | |
Results from Operations Before Financing and Taxation |
2,000,736 | 915,475 | 119 | % | ||||||
Financial income |
323,429 | 230,221 | 40 | % | ||||||
Financial costs |
(1,070,446 | ) | (687,128 | ) | 56 | % | ||||
Exchange differences, net |
(1,448,401 | ) | (398,464 | ) | 263 | % | ||||
| | | | | | | | | | |
Financial results, net |
(2,195,418 | ) | (855,371 | ) | 157 | % | ||||
Gain on acquisition of businesses |
1,084,327 | | | |||||||
| | | | | | | | | | |
Profit Before Income Tax |
889,645 | 60,104 | 1,380 | % | ||||||
Income tax expense |
(25,263 | ) | (48,173 | ) | (48 | )% | ||||
| | | | | | | | | | |
Profit for the Year |
864,382 | 11,931 | 7,145 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
108
Net Sales
Net sales increased by AR$10,183 million, or 46%, from AR$22,134 million for the fiscal year ended November 30, 2015 to AR$32,317 million for the fiscal year ended November 30, 2016, primarily as a result of the correlative increases in net sales for each of our operating segments due to price increases in connection with inflation and a 59% devaluation of the Peso during the period. Further segment-by-segment information relating to net sales is presented in the chart and explanatory paragraphs below.
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Retail Products segment |
||||||||||
Net sales to third parties |
3,717,638 | 2,460,545 | 51 | % | ||||||
| | | | | | | | | | |
Total Net Sales of Retail Products |
3,717,638 | 2,460,545 | 51 | % | ||||||
Branded Industrial Products segment |
||||||||||
Net sales to third parties |
11,281,549 | 10,033,966 | 12 | % | ||||||
Intersegment sales |
1,456,850 | 816,265 | 78 | % | ||||||
| | | | | | | | | | |
Total Net Sales of Branded Industrial Products |
12,738,399 | 10,850,231 | 17 | % | ||||||
Agro-Services and Sustainable Sourcing segment |
||||||||||
Net sales to third parties |
17,318,513 | 9,639,881 | 80 | % | ||||||
Intersegment sales |
5,965,898 | 4,750,189 | 26 | % | ||||||
| | | | | | | | | | |
Total Net Sales of Agro-Services and Sustainable Sourcing |
23,284,411 | 14,390,070 | 62 | % | ||||||
Total Intersegment Sales Elimination |
(7,422,748 |
) |
(5,566,454 |
) |
33 |
% |
||||
Total Net Sales |
32,317,700 |
22,134,392 |
46 |
% |
||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Retail Products
|
For the Fiscal Year Ended November 30 |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
Business Line
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Vegetable oil |
1,364,457 | 822,594 | 66 | % | ||||||
Flour |
1,239,125 | 876,236 | 41 | % | ||||||
Biscuits, cookies and crackers |
685,578 | 461,663 | 49 | % | ||||||
Frozen foods |
160,457 | 21,811 | 636 | % | ||||||
Other products |
268,021 | 278,241 | (4 | )% | ||||||
| | | | | | | | | | |
Total Retail Products Net Sales, net of Intersegment Sales |
3,717,638 | 2,460,545 | 51 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net sales derived from our Retail Products segment increased by AR$1,257 million, or 51%, from AR$2,461 million for the fiscal year ended November 30, 2015 to AR$3,718 million for the fiscal year ended November 30, 2016. The increase in our net sales for this segment was primarily due to an AR$542 million, or 66%, increase in net sales of vegetable oil from AR$823 million for the fiscal year ended November 30, 2015 to AR$1,364 million for the fiscal year ended November 30, 2016 (AR$472 million of this increase was due to an increase in the sales price of our vegetable oil retail products driven by an increase in prices for sunflower seeds, and AR$78 million of this increase was due to a 6% increase in the volume of vegetable oil sold). In addition, the increase in net sales was partially due to an AR$363 million, or 41%, increase in net sales of flour from AR$876 million for the fiscal year ended November 30, 2015 to AR$1,239 million for the fiscal year ended November 30, 2016 (AR$365
109
million of this increase resulted from an increase in prices of retail flour of 42% from AR$3,323 per tonne for the fiscal year ended November 30, 2015 to AR$4,707 per tonne for the fiscal year ended November 30, 2016 due to inflation, partially offset by a AR$2 million decrease in net sales due to a slight decrease in the amount of flour sold during this period).
The growth in net sales for this segment was also partially due to a 49% increase in net sales of cookies, crackers and biscuits from AR$462 million for the fiscal year ended November 30, 2015 to AR$686 million for the fiscal year ended November 30, 2016. This increase was due to a AR$178 million increase in net sales due to an average price increase of 39% in the sales price of such products (from AR$16,772 per tonne for the fiscal year ended November 30, 2015 to AR$23,244 per tonne for the fiscal year ended November 30, 2016) driven by inflation during the period, and a AR$46 million increase in net sales due to a 7% increase in volume of output from 27,526 tonnes for the fiscal year ended November 30, 2015 to 29,495 tonnes for the fiscal year ended November 30, 2016.
The growth in net sales for this segment was also partially due to a 636% increase in net sales of our frozen food business line from AR$22 million for the fiscal year ended November 30, 2015 to AR$160 million for the fiscal year ended November 30 2016, due to a AR$121 million increase in net sales from a 306% increase in sales volume due to improved production capacity as a result of the increased operation of the Spegazzini facility, which resulted in greater inventory for sales, and a AR$81 million increase in net sales from an average increase of 81% in the sales prices of our frozen food products due to both an increase in the costs of primary food products that serve as inputs for our frozen food products as well as an improvement in the overall product mix towards higher-margin frozen food products.
Branded Industrial Products
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
Business line
|
2016 | 2015 | ||||||||
|
(thousands of Pesos) |
% |
||||||||
Wheat flour |
4,311,624 | 2,045,939 | 111 | % | ||||||
Soybean flour, oil and co products |
6,767,760 | 7,764,794 | (13 | )% | ||||||
Packaging (Cañuelas Pack) |
184,495 | 223,233 | (17 | )% | ||||||
Other Products |
17,670 | | | |||||||
| | | | | | | | | | |
Total Branded Industrial Products Sales, net of Intersegment Sales |
11,281,549 | 10,033,966 | 12 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
With respect to our Branded Industrial Products segment, net sales to third parties increased by AR$1,247 million, or 12%, from AR$10,034 million for the fiscal year ended November 30, 2015 to AR$11,281 million for the fiscal year ended November 30, 2016. The increase in net sales to third parties was partially due to an AR$2,265, or 111%, increase in net sales of wheat flour from AR$2,046 million for the fiscal year ended November 30, 2015 to AR$4,312 million for the fiscal year ended November 30, 2016 due to a AR$1,841 million increase in net sales primarily from a 90% increase in the average price of flour, which was due to an increase in the price of wheat for the fiscal year ended November 30, 2016 as a result of inflation, and a AR$425 million increase in net sales from an 11% increase in the volume of sales (from 815,115 tonnes for the fiscal year ended November 15, 2015 to 904,230 tonnes for the fiscal year ended November 30, 2016) due to increased milling capacity during our last fiscal quarter resulting from the Cargill Acquisition. This increase in net sales was partially offset by a AR$997 million, or 13%, decrease in the net sales of soybean flour, oil and co products, from AR$7,765 million for the year ended November 30, 2015 to AR$6,768 million for the fiscal year ended November 30, 2016. This decrease was driven by a AR$2,019 million decrease in sales due to a 23% decrease in the volume of soybean flour, oil and co products sold to third parties (from
110
1,474,494 tonnes for the fiscal year ended November 30, 2015 to 1,135,738 tonnes for the fiscal year ended November 30, 2016) resulting from the lack of non-recurring business opportunities that existed in 2015 and was partially offset by a AR$1,022 million increase in net sales from higher average prices in our soybean flour, oil and co products due to inflation.
Agro-Services and Sustainable Sourcing
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
Business line
|
2016 | 2015 | ||||||||
|
(thousands of Pesos) |
% |
||||||||
Sustainable sourcing |
12,766,349 | 6,731,328 | 90 | % | ||||||
Agro-services |
4,432,136 | 2,771,645 | 60 | % | ||||||
Port and logistics |
120,028 | 136,908 | (12 | )% | ||||||
| | | | | | | | | | |
Total Agro-Services and Sustainable Sourcing Net Sales, net of Intersegment Sales |
17,318,513 | 9,639,881 | 80 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net sales from the Agro-Services and Sustainable Sourcing segment attributable to third parties increased by AR$7,679 million, or 80%, from AR$9,640 million for the fiscal year ended November 30, 2015 to AR$17,318 million for the fiscal year ended November 30, 2016. This increase resulted primarily from an AR$1,660 million, or 60%, increase in net sales of our agro-services business line from AR$2,772 million in the fiscal year ended November 30, 2015 to AR$4,432 million for the fiscal year ended November 30, 2016 and an AR$6,035 million, or 90%, increase in net sales of our sustainable sourcing business line from AR$6,731 million for the fiscal year ended November 30, 2015 to AR$12,766 million for the fiscal year ended November 30, 2016. This increase was partially offset by a decrease of AR$17 million, or 12%, in our net sales as part of our port and logistics business line from AR$137 million for the fiscal year ended November 30, 2015 to AR$120 million for the fiscal year ended November 30, 2016.
The 90% increase in net sales of our sustainable sourcing business line for the fiscal year ended November 30, 2016 was primarily the result of an increase in the average price of agricultural products. This price increase was primarily due to a reduction of 5% in export taxes on soybean and soybean derivatives, the complete elimination of export taxes on wheat and corn (which resulted in increased prices), and the devaluation of the Peso against the U.S. Dollar and inflation during the period. This increase was also partially due to a 2.6% increase in the total volume of agricultural products sold to third parties (from 5,018,547 tonnes for the fiscal year ended November 30, 2015 to 5,148,343 tonnes for the fiscal year ended November 30, 2016).
The increase in net sales of 60% for our agro-services business line was primarily the result of a 78% increase in net sales of farming products, which represented 62% of the net sales in our agro-services business line, for the fiscal year ended November 30, 2016, and a 43% increase in net sales from services offered, which represented 36% of the net sales in our agro-services business line, for the fiscal year ended November 30, 2016. The increase in net sales for services offered in our agro-services business line was primarily due to a 19% increase in average prices for agricultural services and a 20% increase in volume of sales. In each case regarding farming products and services, the increase in prices was due primarily to inflation and the devaluation of the Peso.
Cost of Sales
Cost of sales increased by AR$7,893 million, or 46%, from AR$17,189 million for the fiscal year ended November 30, 2015 to AR$25,082 million for the fiscal year ended November 30, 2016 due
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primarily to inflation and the devaluation of the Peso and the elimination of export taxes and the impact of the growth in sales volume as described in further detail below.
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Retail products |
(2,318,800 | ) | (1,767,771 | ) | 31 | % | ||||
Retail products to third parties |
(2,276,227 | ) | (1,733,731 | ) | 31 | % | ||||
Branded industrial products |
(8,728,087 | ) | (8,003,631 | ) | 9 | % | ||||
Branded industrial products to third parties |
(7,254,155 | ) | (7,174,374 | ) | 1 | % | ||||
Agro-services and sustainable sourcing |
(21,457,948 | ) | (12,984,014 | ) | 65 | % | ||||
Agro-services and sustainable sourcing to third parties |
(15,551,704 | ) | (8,280,857 | ) | 88 | % | ||||
| | | | | | | | | | |
Elimination of intersegment sales |
7,422,748 | 5,566,454 | 33 | % | ||||||
| | | | | | | | | | |
Total Cost of Sales, net of Intersegment Sales |
(25,082,087 | ) | (17,188,962 | ) | 46 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Retail Products
Cost of sales to third parties for our Retail Products segment increased by AR$542 million, or 31%, from AR$1,734 million for the fiscal year ended November 30, 2015 to AR$2,276 million for the fiscal year ended November 30, 2016 (AR$512 million of this increase was due to an increase in input costs associated with the production of vegetable oil, flour, cookies, crackers and biscuits, and AR$31 million of this increase was due to higher volume). In the case of vegetable oil, cost of sales increased primarily due to a 105% increase in the price of sunflower seeds, which impacted approximately 50% of the product's cost, as well as the devaluation of the Peso and inflation, which was partially offset by a decrease in the volume of vegetable oil production (from 78,876 tonnes for the fiscal year ended November 30, 2015 to 83,673 tonnes for the fiscal year ended November 30, 2016). Cost of sales associated with the production of flour increased due to a 111% increase in wheat prices due to the devaluation of the Peso, inflation and the elimination of export taxes on wheat, which increased prices of local wheat (as a result of reduced supply for the Argentine market as exports became more attractive), which represented 54% of our cost of sales associated with flour production. There was no significant variation in the volume of flour produced. Finally, the cost of sales associated with biscuits, cookies and crackers increased primarily due to increased costs for flour and margarine as a result of inflation and devaluation of the Peso and a 7% increase in the volume of biscuits, cookies and crackers produced (from 27,526 tonnes for the fiscal year ended November 30, 2015 to 29,495 tonnes for the fiscal year ended November 30, 2016).
Branded Industrial Products
Cost of sales to third parties for our Branded Industrial Products segment increased by AR$80 million, or 1%, from AR$7,174 million for the fiscal year ended November 30, 2015 to AR$7,254 million for the fiscal year ended November 30, 2016. This increase was mainly due to an 11% increase in the volume of our wheat flour production (from 815,115 tonnes for the fiscal year ended November 30, 2015 to 904,230 tonnes for the fiscal year ended November 30, 2016). The increase in costs of sales was partially offset by the decreased production volume of soybean flour, oil and co products, and the reduction of export taxes on soybeans and elimination of export taxes on wheat. Further, for the fiscal year ended November 30, 2016, there was a 23% decrease in volume of net sales of soybean flour, oil and co products (from 1,474,494 tonnes for the fiscal year ended November 30, 2015 to 1,135,738 tonnes for the fiscal year ended November 30, 2016) and a 5% decrease in the export tariffs applicable to soybean, which was partially offset by a 73% increase in the price of soybeans during the same period.
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Agro-Services and Sustainable Sourcing
Cost of sales to third parties for our Agro-Services and Sustainable Sourcing segment increased by AR$7,270 million, or 88%, from AR$8,281 million for the fiscal year ended November 30, 2015 to AR$15,551 million for the fiscal year ended November 30, 2016, primarily due to an increase in the price of agricultural products sourced and an increase in the cost of agricultural supplies sold. The increase in the price of agricultural products sourced was due to a 73% increase in the price of soybean, a 145% increase in the price of corn and a 111% increase in the price of wheat, all of which were due to the devaluation of the Peso and inflation, and as well as in regards solely to corn and wheat, the elimination or reduction of export taxes as described above and a 36% increase in the volume of agricultural products sourced. The increase in the cost of agricultural supplies sourced was due to a 2.6% increase in the volume of agricultural supplies sold in the fiscal year ended November 30, 2016 and a 20% increase in the price of goods sold for the fiscal year ended November 30, 2016, due primarily to the devaluation of the Peso and inflation.
Selling Expenses
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Freight and delivery costs |
707,407 | 476,019 | 49 | % | ||||||
Taxes |
492,568 | 277,742 | 77 | % | ||||||
Commissions |
250,950 | 142,073 | 77 | % | ||||||
Salaries and fringes |
236,706 | 149,149 | 59 | % | ||||||
Exports duties and expenses |
2,562,995 | 2,400,148 | 7 | % | ||||||
Other(1) |
167,846 | 101,856 | 65 | % | ||||||
| | | | | | | | | | |
Total Selling Expenses |
4,418,472 | 3,546,987 | 25 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Selling expenses increased by AR$871 million, or 25%, from AR$3,547 million for the fiscal year ended November 30, 2015 to AR$4,418 million for the fiscal year ended November 30, 2016, primarily due to an increase in freight and delivery costs along with an increase in taxes and commissions. Selling expenses associated with freight and delivery costs increased by 49% primarily due to inflation despite no material increase in the volume of shipping activities. In addition, the 77% increase in taxes for the fiscal year ended November 30, 2016 was due to a 46% increase in net sales and an increase in our total number of operating plants which resulted in an increase in property taxes. Finally the increase in selling expenses was also due to a 77% increase in commissions which resulted from an increase in net sales of flour in our Branded Industrial Products segment as well as a 59% increase in salaries due to inflation.
In addition, the increase in selling expenses was also due to a 7% increase in export duties and expenses primarily due to a 57% increase in net sales of exported soybean and an increase in export taxes associated therewith from AR$2,400 million for the fiscal year ended November 30, 2015 to AR$2,563 million for the fiscal year ended November 30, 2016. This increase in export expenses was partially offset by the reduction in the export tariff on soybeans and soybean derivatives from 35% and 32% as of November 30, 2015 to 30% and 27% as of November 30, 2016, respectively.
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Administrative Expenses
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Salaries and fringes |
333,950 | 221,873 | 51 | % | ||||||
Employee related expenses |
52,937 | 23,870 | 122 | % | ||||||
Maintenance and repairs |
28,315 | 16,642 | 70 | % | ||||||
Taxes |
20,059 | 15,173 | 32 | % | ||||||
Director fees |
122,640 | 11,597 | 958 | % | ||||||
Other(1) |
269,386 | 221,450 | 22 | % | ||||||
| | | | | | | | | | |
Total Administrative Expenses |
827,287 | 510,605 | 62 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Administrative expenses increased by AR$317 million, or 62%, from AR$511 million for the fiscal year ended November 30, 2015 to AR$827 million for the fiscal year ended November 30, 2016, primarily due to a 51% or AR$112 million increase in salaries and related fringe benefits due to inflation and a 122% or AR$29 million increase in employee-related expenses and maintenance and repairs expenses associated with the expansion of the Spegazzini facility and the Cargill Acquisition, as well as due to a 31% increase in salaries as a result of inflation. Director's fees also increased by AR$111 million, or 958%, from AR$12 million for the fiscal year ended November 30, 2015 to AR$123 million for the fiscal year ended November 30, 2016 primarily due to an increase in director compensation in connection with increased work-loads relating to the Reorganization, our Global Offering and the Cargill Acquisition. Costs of sale were further increased by increased maintenance and repairs expenses resulting from the higher utilization of plants and production assets during the second half of the fiscal year.
Financial Results, Net
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2016 | 2015 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Financial income |
323,429 | 230,221 | 40 | % | ||||||
Financial costs |
(1,070,446 | ) | (687,128 | ) | 56 | % | ||||
Exchange differences, net |
(1,448,401 | ) | (398,464 | ) | 263 | % | ||||
| | | | | | | | | | |
Financial Results, net |
(2,195,418 | ) | (855,371 | ) | 157 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Financial results, net decreased by AR$1,340 million, or 157%, from AR$855 million for the fiscal year ended November 30, 2015 to AR$2,195 million for the fiscal year ended November 30, 2016, primarily as a result of:
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subject to the Central Bank of Argentina's Badlar interest rate, from 27.25% to 19.88% during the fiscal year ended November 30, 2016; and
Gain on Acquisition of Business
Gain on acquisition of business increased by AR$1,084 million from AR$0 for the fiscal year ended November 30, 2015 to AR$1, 084 for the fiscal year ended November 30, 2016, which was primarily due to there not having been a similar transaction in the prior year.
Income Tax Expense
The income tax expense fell by AR$23 million, or 48%, from AR$48 million for the fiscal year ended November 30, 2015 to AR$25 million for the fiscal year ended November 30, 2016. This was attributable primarily due to the fact that the 1,380% increase in profit before income tax for the fiscal year ended November 30, 2016 was primarily attributable to one-time non-taxable income resulting from profit from a business combination and a deduction of the exchange rate difference generated from non-current borrowing which resulted in an effective tax rate of 3% for the fiscal year ended November 30, 2016 compared to an effective tax rate of 80% for the fiscal year ended November 30, 2015.
Profit for the Year
As a result of all of the factors mentioned above, the profit for the year increased by AR$852 million, or 7,145%, from AR$12 million for the fiscal year ended November 30, 2015 to AR$864 million for the fiscal year ended November 30, 2016.
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Fiscal Year Ended November 30, 2015 Compared to Fiscal Year Ended November 30, 2014
The following table sets forth certain financial information with respect to our consolidated results of operations for the periods presented.
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Net sales |
22,134,392 | 19,821,199 | 12 | % | ||||||
Cost of sales |
(17,188,962 | ) | (15,667,852 | ) | 10 | % | ||||
| | | | | | | | | | |
Margin Before Operating Expenses |
4,945,430 | 4,153,347 | 19 | % | ||||||
Selling expenses |
(3,546,987 | ) | (2,967,422 | ) | 20 | % | ||||
Administrative expenses |
(510,605 | ) | (443,732 | ) | 15 | % | ||||
Other operating income, net |
27,637 | 24,088 | 15 | % | ||||||
| | | | | | | | | | |
Results from Operations Before Financing and Taxation |
915,475 | 766,281 | 19 | % | ||||||
Financial income |
230,221 | 267,655 | (14 | )% | ||||||
Financial costs |
(687,128 | ) | (506,041 | ) | 36 | % | ||||
Exchange differences, net |
(398,464 | ) | (311,690 | ) | 28 | % | ||||
| | | | | | | | | | |
Financial results, net |
(855,371 | ) | (550,076 | ) | 56 | % | ||||
| | | | | | | | | | |
Profit Before Income Tax |
60,104 | 216,205 | (72 | )% | ||||||
Income tax expense |
(48,173 | ) | (68,396 | ) | (30 | )% | ||||
| | | | | | | | | | |
Profit for the Year |
11,931 | 147,809 | (92 | )% | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Profit Attributable to: |
||||||||||
Equity holders of the parent |
11,931 | 147,809 | (92 | )% | ||||||
| | | | | | | | | | |
TOTAL |
11,931 | 147,809 | (92 | )% | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net Sales
Net sales increased by AR$2,313 million, or 12%, from AR$19,821 million for the fiscal year ended November 30, 2014 to AR$22,134 million for the fiscal year ended November 30, 2015, primarily as a result of the correlative increases in net sales for each of our operating segments. Further segment-by-segment information relating to net sales is presented in the chart and explanatory paragraphs below.
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Retail Products segment |
||||||||||
Net sales to third parties |
2,460,545 | 2,392,602 | 3 | % | ||||||
| | | | | | | | | | |
Total Net Sales Retail Products |
2,460,545 | 2,392,602 | 3 | % | ||||||
Branded Industrial Products segment |
||||||||||
Net sales to third parties |
10,033,966 | 6,729,027 | 49 | % | ||||||
Intersegment Sales |
816,265 | 923,128 | (12 | )% | ||||||
| | | | | | | | | | |
Total Net Sales of Branded Industrial Products |
10,850,231 | 7,652,155 | 42 | % | ||||||
Agro-Services and Sustainable Sourcing segment |
||||||||||
Net sales to third parties |
9,639,881 | 10,699,570 | (10 | )% | ||||||
Intersegment sales |
4,750,189 | 4,291,820 | 11 | % | ||||||
| | | | | | | | | | |
Total Net Sales of Agro-Services and Sustainable Sourcing |
14,390,070 | 14,991,390 | (4 | )% | ||||||
Total Intersegment Sales Elimination |
(5,566,454 | ) | (5,214,948 | ) | 7 | % | ||||
| | | | | | | | | | |
Total Net Sales |
22,134,392 | 19,821,199 | 12 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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Retail Products
|
Net Sales for the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Vegetable oils |
822,594 | 654,197 | 26 | % | ||||||
Flour |
876,236 | 1,110,937 | (21 | )% | ||||||
Biscuits, cookies and crackers |
461,663 | 372,781 | 24 | % | ||||||
Frozen food products |
21,811 | | | |||||||
Other products |
278,241 | 254,687 | 9 | % | ||||||
| | | | | | | | | | |
Total Retail Products Sales, net of Intersegment Sales |
2,460,545 | 2,392,602 | 3 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net sales derived from our Retail Products segment increased by AR$68 million, or 3%, from AR$2,393 million for the fiscal year ended November 30, 2014 to AR$2,461 million for the fiscal year ended November 30, 2015 mainly due to an increase in third party sales of vegetable oils, biscuits, cookies and crackers. Specifically, the increase in our net sales for this segment was driven by a AR$168 million, or 26%, increase in third party vegetable oil sales from AR$654 million in 2014 to AR$823 million in 2015, (resulting from a AR$296 million increase in net sales resulting from a series of increases in the price of vegetable oils due to increased production costs, offset by a decrease in the volume of vegetable oil sold (from 91,770 tonnes for the fiscal year ended November 30, 2014 as compared to 79,427 tonnes of vegetable oil sold for the fiscal year ended November 30, 2015)), and an AR$89 million, or 24%, increase in sales of biscuits, cookies and crackers from AR$373 million in 2014 to AR$462 million in 2015 (resulting primarily from a AR$21 million in increase in net sales from 5% higher sales volumes of 27,526 tonnes for the fiscal year ended November 30, 2015 as compared to 26,273 tonnes for the fiscal year ended November 30, 2014 and AR$68 million increase in net sales from an 18% increase in prices). In addition, our net sales increased due to the opening of the Spegazzini facility in February 2015, which resulted in a AR$22 million increase in net sales resulting from the production of 1,560 tonnes of frozen food products (consisting primarily of breads and frozen croissants) from February 2015 through November 2015.
The growth in net sales for this segment was partially offset by a AR$235 million, or 21%, decrease in sales of flour from AR$1,111 million for the fiscal year ended November 30, 2014 to AR$876 million for the fiscal year ended November 30, 2015, resulting from a AR$225 decrease in net sales due to decreased sales prices as a result of a decrease in flour prices resulting from lower wheat prices, which decreased by 37% (from AR$1,669 for the fiscal year ended November 30, 2014 to AR$1,043 million for the fiscal year ended November 30, 2015), and a AR$9 million decrease in net sales due to a 1% decrease in sales volume.
Branded Industrial Products
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
Business line
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Wheat flour |
2,045,939 | 2,431,303 | (16 | )% | ||||||
Soybean flour, oil and co products |
7,764,794 | 4,139,448 | 88 | % | ||||||
Packaging (Cañuelas Pack) |
223,233 | 158,276 | 41 | % | ||||||
| | | | | | | | | | |
Total Branded Industrial Products Sales, net of Intersegment Sales |
10,033,966 | 6,729,027 | 49 | % | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net sales to third parties for our Branded Industrial Products segment increased by AR$3,305 million, or 49%, from AR$6,729 million for the fiscal year ended November 30, 2014 to
117
AR$10,034 million for the fiscal year ended November 30, 2015, primarily due to a AR$3,625 million, or 88%, increase in net sales of soybean flour, oil and co products from AR$4,139 million for the fiscal year ended November 30, 2014 to AR$7,765 million for the fiscal year ended November 30, 2015, and a AR$65 million, or 41%, increase in the sales of packaging products from AR$158 million for the fiscal year ended November 30, 2014 to AR$223 million for the fiscal year ended November 30, 2015. The increase in our sales of soybean flour, oil and co products for the fiscal year ended November 30, 2015 as compared to the fiscal year ended November 30, 2014 was primarily due to an increase in net sales of AR$3,784 million due to a 95% increase in the volume of soybean sold (from 755,843 tonnes for the fiscal year ended November 30, 2014 to 1,474,494 tonnes for the fiscal year ended November 30, 2015) as a result of a business opportunity to expand to new export markets, offset by a AR$159 million decrease in net sales due to a 4% lower average price of our soybean flour, oil and co-products. The increase in net sales in our Branded Industrial Products segment was partially offset by a decrease in net sales of wheat flour of AR$385 million, or 16%, from AR$2,431 million for the fiscal year ended November 30, 2014 to AR$2,046 million for the fiscal year ended November 30, 2015. This decrease in net sales of wheat flour was primarily due to a AR$385 million decrease in net sales from a decrease of approximately 16% in the price of wheat flour sold under our Branded Industrial Products segment. There was no significant variation in the volume of flour sold.
The increase in our sales of packaging products for the fiscal year ended November 30, 2015 as compared to the fiscal year ended November 30, 2014 was primarily the result of a 38% improvement in net sales resulting from an improved mix of products sold (i.e., an increase in the relative amount of higher margin packaging products).
Agro-Services and Sustainable Sourcing
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
Business line
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Sustainable Sourcing |
6,731,328 | 7,925,441 | (15 | )% | ||||||
Agro-Services |
2,771,645 | 2,631,914 | 5 | % | ||||||
Port and Logistics |
136,908 | 142,215 | (4 | )% | ||||||
| | | | | | | | | | |
Total Agro-Services and Sustainable Sourcing, net of intersegment Sales |
9,639,881 | 10,699,570 | (10 | )% | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net sales from the Agro-Services and Sustainable Sourcing segment attributable to third parties decreased by AR$1,060 million, or 10%, from AR$10,699 million for the fiscal year ended November 30, 2014 to AR$9,640 million for the fiscal year ended November 30, 2015, primarily due to an AR$1,194 million, or 15%, decrease in net sales of sustainable sourcing from AR$7,925 million in the fiscal year ended November 30, 2014 to AR$6,731 million for the fiscal year ended November 30, 2015 but was partially offset by an increase in net sales of agro-services of AR$140 million, or 5%, from AR$2,632 million for the fiscal year ended November 30, 2014 to AR$2,772 million for the fiscal year ended November 30, 2015.
The 15% decrease in net sales during 2015 was primarily the result of a 10% decrease in the price of soybean, a 37% decrease in the price of wheat and a 55% decrease in the price of corn, which was partially offset by an increase of 160,450 tonnes, or 3%, in the volume of agricultural products we originated during the fiscal year ended November 30, 2015 (from 4,858,097 tonnes for the fiscal year ended November 30, 2014 to 5,018,547 for the fiscal year ended November 30, 2015) as a result of increased agricultural production in Argentina and in the regions in which we operate.
The increase in net sales for services of 5% was primarily due to a 16% increase in the average fees charged for services, which represent 40% of the net sales in our services business line. This
118
increase was partially offset by a decrease in net sales attributable to farming products, which accounted for 57% of the sales in our agro services business line, due to a 27% decrease in the volume of farming products sold due to lower demand for fertilizers and other agro-inputs by food producers.
Cost of Sales
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Retail Products |
(1,767,771 | ) | (1,659,209 | ) | 7 | % | ||||
Retail Products to third parties |
(1,733,731 | ) | (1,636,704 | ) | 6 | % | ||||
Branded Industrial Products |
(8,003,631 | ) | (5,666,905 | ) | 41 | % | ||||
Branded Industrial Products to third parties |
(7,174,374 | ) | (4,723,789 | ) | 52 | % | ||||
Agro-Services and Sustainable Sourcing |
(12,984,014 | ) | (13,556,686 | ) | (4 | )% | ||||
Agro-Services and Sustainable Sourcing to third parties |
(8,280,857 | ) | (9,307,359 | ) | (11 | )% | ||||
| | | | | | | | | | |
Elimination of Intersegment Sales |
5,566,454 | 5,214,948 | 7 | % | ||||||
| | | | | | | | | | |
Total Cost of Sales, net of Intersegment Sales |
(17,188,962 | ) | (15,667,852 | ) | 10 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Cost of sales to third parties increased by AR$1,521 million, or 10%, from AR$15,667 million for the fiscal year ended November 30, 2014 to AR$17,189 million for the fiscal year ended November 30, 2015, mainly as a result of an increase in the price of certain of our inputs due to inflation and devaluation of the Peso and an increase in production volumes of certain of our products. Further segment-by-segment information relating to cost of sales is presented in the charts and explanatory paragraphs below.
Retail Products
Cost of sales to third parties for our Retail Products segment increased by AR$97 million, or 6%, from AR$1,637 million for the fiscal year ended November 30, 2014 to AR$1,734 million for the fiscal year ended November 30, 2015, primarily due to higher costs of AR$160 million resulting from a 10% increase in the average costs of our retail products. The increase in cost of sales was partially offset by a AR$63 million decrease in costs resulting from a 4% decrease in sales volume.
Branded Industrial Products
Cost of sales to third parties for our Branded Industrial Products segment increased by AR$2,450 million, or 52%, from AR$4,724 million for the fiscal year ended November 30, 2014 to AR$7,174 million for the fiscal year ended November 30, 2015, primarily due to a 95% increase in the volume of soybean products produced (from 755,843 tonnes for the fiscal year ended November 30, 2014 to 1,474,494 tonnes for the fiscal year ended November 30, 2015). This increase was also due to a 3% increase in the volume of flour produced (from 792,535 tonnes for the fiscal year ended November 30, 2014 to 815,115 tonnes for the fiscal year ended November 30, 2015).
This increase was partially offset by a decrease in the price of raw materials used in food production due to a 13% decrease in the price of soybean and a 37% decrease in the price of wheat.
Agro-Services and Sustainable Sourcing
Cost of sales to third parties for our Agro-Services and Sustainable Sourcing segment decreased by AR$1,027 million, or 11%, from AR$9,307 million for the fiscal year ended November 30, 2014 to AR$8,281 million for the fiscal year ended November 30, 2015, primarily due to decreases in the price of agricultural products sourced (with soybean decreasing by 10%, corn decreasing by 55% and wheat
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decreasing by 37%) which was partially offset by an increase of 3% in volume of agricultural products sold. This decrease was also due to a 4% decrease in the costs of agro-supplies due to a 27% decrease in volume of farming products and services as a result of the decrease in demand from our farmers, which was partially offset by a 32% increase in the price of farming products and services due to the impact of the devaluation of the Peso.
Selling Expenses
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Freight and delivery costs |
(476,019 | ) | (356,390 | ) | 34 | % | ||||
Export duties and expenses |
(2,400,148 | ) | (2,063,378 | ) | 16 | % | ||||
Other |
(670,820 | ) | (547,654 | ) | 22 | % | ||||
| | | | | | | | | | |
Total Selling Expenses |
(3,546,987 | ) | (2,967,422 | ) | 20 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total selling expenses increased by AR$580 million, or 20%, from AR$2,967 million for the fiscal year ended November 30, 2014 to AR$3,547 million for the fiscal year ended November 30, 2015, primarily as a result of increases in freight and delivery costs due to changes in exchange rates, increased export costs associated with the export of soybeans and increases in other costs, including overhead and sales costs associated with the launch of our frozen food products business line.
Freight and delivery costs increased AR$120 million, or 34%, from AR$356 million for the fiscal year ended November 30, 2014 to AR$476 million for the fiscal year ended November 30, 2015, primarily due to foreign exchange costs in connection with the devaluations of the Peso which occurred in 2015.
Export costs increased AR$337 million, or 16%, from AR$2,063 million for the fiscal year ended November 30, 2014 to AR$2,400 million for the fiscal year ended November 30, 2015, primarily due to a 64% increase in the volume of soybean sold and the corresponding increase in export tariffs paid. These costs were partially offset by decreased exports of unprocessed soy.
Other expenses increased AR$123 million, or 22%, from AR$548 million for the fiscal year ended November 30, 2014 to AR$671 million for the fiscal year ended November 30, 2015, primarily due to increased salary and overhead costs associated with the launch of our frozen food products business line.
Administrative Expenses
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Salaries and fringes |
(221,873 | ) | (153,269 | ) | 45 | % | ||||
Taxes |
(15,173 | ) | (56,370 | ) | (73 | )% | ||||
Other |
(273,559 | ) | (234,093 | ) | 17 | % | ||||
| | | | | | | | | | |
Total Administrative Expenses |
(510,605 | ) | (443,732 | ) | 15 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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Administrative expenses increased by AR$67 million, or 15%, from AR$444 million for the fiscal year ended November 30, 2014 to AR$511 million for the fiscal year ended November 30, 2015, primarily as a result of an increase in our overall number of employees, organic growth and related increases in employee wages. The increase in administrative expenses was offset by decreases in our taxes and tariffs resulting from decreased bank charges relating to efforts to improve cost savings related with bank expenses, and by a reduction in our pre-operating expenses stemming from the commencement of operations at our Spegazzini facility.
Salaries and fringes increased AR$69 million, or 45%, from AR$153 million for the fiscal year ended November 30, 2014 to AR$222 million for the fiscal year ended November 30, 2015. This increase was primarily as a result of an increase in the number of employees in connection with the opening of our Spegazzini facility and organic growth, as well as wage increases of 30% on average resulting from collective bargaining arrangements involving certain of our employees who are members of the miller and vegetable oil workers union.
Taxes decreased AR$41 million, or 73%, from AR$56 million for the fiscal year ended November 30, 2014 to AR$15 million for the fiscal year ended November 30, 2015, primarily due to lower bank charges related to efforts to improve cost savings related with bank expenses.
Financial Results, Net
|
For the Fiscal Year Ended November 30, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Increase / (decrease) |
|||||||||
|
2015 | 2014 | ||||||||
|
(in thousands of Pesos) |
% |
||||||||
Financial income |
230,221 | 267,655 | (14 | )% | ||||||
Financial costs |
(687,128 | ) | (506,041 | ) | 36 | % | ||||
Exchange differences, net |
(398,464 | ) | (311,690 | ) | 28 | % | ||||
| | | | | | | | | | |
Financial Results, Net |
(855,371 | ) | (550,076 | ) | 56 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Financial results, net increased by AR$305 million, or 56%, from AR$550 million for the fiscal year ended November 30, 2014 to AR$855 million for the fiscal year ended November 30, 2015, primarily as a result of:
Income Tax Expense
Our income tax expense fell by AR$20 million, or 30%, from AR$68 million for the fiscal year ended November 30, 2014 to AR$48 million for the fiscal year ended November 30, 2015 due to a
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decrease in Net Income before Taxes, which was partially offset by an increase in the effective tax rate which rose from 32% to 80% for the fiscal year ended November 30, 2015.
Profit for the Year
As a result of all factors mentioned above, the profit attributable to equity holders of the parent declined by AR$136 million, or 92%, from AR$148 million for the fiscal year ended November 30, 2014 to AR$12 million for the fiscal year ended November 30, 2015.
Liquidity and Capital Resources
Our liquidity and capital resources are influenced by a variety of factors, including:
Projected Sources and Uses of Cash
Historically, our principal sources of liquidity have consisted of contributions of cash from our operations, equity contributions by our shareholders and short-term and long-term borrowings from banks and other financial institutions.
We anticipate that we will generate cash from the following sources:
We expect our operating cash flow to be positive in the foreseeable future for the following reasons:
Nevertheless, we cannot assure you that we will generate positive operating cash flow.
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As of the date of this prospectus, we believe that our working capital will be sufficient to meet our present requirements. In addition, we believe we will have the ability to further increase the level of our indebtedness such that our ability to raise cash will be in excess of any near-term working capital and capital expenditure requirements. We note that our ability to fund projected capital expenditures may, however, be constrained in the event external financing is not available, or at terms favorable to us, and accordingly we may have to postpone capital expenditure and other spending plans. If, however, we are not able to timely consummate spending on any required capital or other expenditures, our business, financial condition and results of operations may be materially and adversely affected.
We expect to use our available cash to:
As of the end of the fiscal year ended November 30, 2016, we had no material commitments for capital expenditures.
Comparison of Cash Flow Information
The tables below summarize the information from our consolidated statements of cash flows for the fiscal years ended November 30, 2014, 2015 and 2016.
|
For the Fiscal Year Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Net cash generated (used) in operating activities |
2,526,995 | (810,980 | ) | 886,959 | ||||||
Net cash (used in) investing activities |
(1,964,846 | ) | (393,256 | ) | (602,991 | ) | ||||
Net cash (used in) generated from financing activities |
2,097,256 | 1,027,373 | (73,832 | ) | ||||||
Foreign exchange (losses) / gains on cash and cash equivalents |
191,531 | (757 | ) | 45,770 | ||||||
| | | | | | | | | | |
Net increase in cash and cash equivalents |
2,850,936 | (177,620 | ) | 255,906 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Operating Activities
|
For the Fiscal Year Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Profit for the year |
864,382 | 11,931 | 147,809 | |||||||
Income tax expense |
25,263 | 48,173 | 68,396 | |||||||
Income tax paid |
(50,014 | ) | (80,686 | ) | (54,544 | ) | ||||
Non-Cash Charges and Credits |
1,568,179 | 817,041 | 616,664 | |||||||
Change in working capital items |
119,185 | (1,607,439 | ) | 108,634 | ||||||
| | | | | | | | | | |
Net cash generated from / (used in) operating activities |
2,526,995 | (810,980 | ) | 886,959 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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Year Ended November 30, 2016 Compared to Year Ended November 30, 2015
Net cash generated from operating activities increased by AR$3,338 million, or 412%, from AR$(811) million for the fiscal year ended November 30, 2015 to AR$2,527 million in net cash generated for the fiscal year ended November 30, 2016, primarily attributable to an increase in cash from operating activities due to an increase in net sales as a result of inflation and the devaluation of the Peso against the U.S. Dollar and certain increases in the volume of products sold due to improvements in operations. Additionally, the increase was due to an increase of AR$1,727 million in working capital items primarily due to the increased availability of financing from suppliers of farming products and services as well as an increase in net sales as a result of general increases in sales prices due to inflation and the devaluation of the Peso.
Year Ended November 30, 2015 Compared to Year Ended November 30, 2014
Net cash generated from operating activities decreased by AR$1,698 million, or 191%, from AR$887 million for the fiscal year ended November 30, 2014 to AR$(811) million for the fiscal year ended November 30, 2015, primarily attributable to a decrease of AR$1,716 million in working capital items resulting from the implementation of a broader policy enacting longer repayment periods for farmers along with increased re-payment periods for farmers purchasing agro-services and other products from us. This decrease was partially offset by non-cash charges and credits, which increased by AR$198 million for the fiscal year ended November 30, 2015 due primarily to increased depreciation resulting from the increased valuation of our property stemming from plant improvements and an increase in interest charges due primarily to increased indebtedness in order to finance increased working capital requirements.
Investing Activities
|
For the Fiscal Years Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Purchases of property, plant and equipment |
(1,284,842 | ) | (419,393 | ) | (563,511 | ) | ||||
Purchases of investment property |
(6,100 | ) | (2,468 | ) | (69,609 | ) | ||||
Purchases of intangible assets |
(2,479 | ) | (3,129 | ) | (6,801 | ) | ||||
Sales of property, plant and equipment |
21,670 | 17,653 | 36,423 | |||||||
Acquisition of business |
(736,190 | ) | | | ||||||
Sales of related companies |
43,095 | 14,573 | | |||||||
Other investments |
| (492 | ) | 507 | ||||||
| | | | | | | | | | |
Net Cash Used in Investing Activities |
(1,964,846 | ) | (393,256 | ) | (602,991 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Year Ended November 30, 2016 Compared to Year Ended November 30, 2015
Net cash used in investing activities increased by AR$1,572 million, or 400%, from AR$(393) million for the fiscal year ended November 30, 2015 to AR$(1,965) million for the fiscal year ended November 30, 2016. Such increase was primarily attributable to the AR$865 million, or 206%, increase in purchases of property, plant and equipment from AR$419 million for the fiscal year ended November 30, 2015 to AR$1,285 million for the fiscal year ended November 30, 2016. This increase was primarily due to installation of additional production lines at the Spegazzini facility (including new bread, muffin, frozen food and cookie production lines), the construction of two new mills (one at the Cañuelas facility and another in Uruguay) and an increase of AR$736 million due to the Cargill Acquisition.
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Year Ended November 30, 2015 Compared to Year Ended November 30, 2014
Net cash used in investing activities decreased by AR$210 million from AR$(603) million for the fiscal year ended November 30, 2014 to AR$(393) million for the fiscal year ended November 30, 2015. In both years, investments are related to the construction and start-up of our Spegazzini facility, coupled with the expansion of the installed milling capacity in our mill located in Cañuelas, Argentina which increased by approximately 110,000 annual tonnes. Additionally, further investments were undertaken to expand the capacity of our mill in Uruguay and for the installation of a new mill in Córdoba, Argentina with an annual capacity of 100,000 tonnes. The decrease from 2015 to 2014 primarily reflects the fact that our Spegazzini facility commenced operations in 2015, thereby requiring fewer cash investments during the period.
Financing Activities
|
For the Fiscal Years Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Loans paid |
(11,250,069 | ) | (3,999,372 | ) | (3,553,332 | ) | ||||
Borrowings |
14,776,968 | 5,698,424 | 3,983,752 | |||||||
Interest paid |
(1,045,344 | ) | (655,479 | ) | (504,329 | ) | ||||
Closing of Reorganization Transactions |
(310,099 | ) | | 77 | ||||||
Dividends paid |
(74,200 | ) | (16,200 | ) | | |||||
| | | | | | | | | | |
Net Cash Generated from Financing Activities |
2,097,256 | 1,027,373 | (73,832 | ) | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Year Ended November 30, 2016 Compared to Year Ended November 30, 2015
Net cash generated from financing activities increased AR$1,070, or 104%, from AR$1,027 million for the fiscal year ended November 30, 2015 to AR$2,097 million for the fiscal year ended November 30, 2016, resulting from increases in borrowings for investments and working capital. These additional investments and growth in working capital were done primarily through the incurrence of additional borrowings of US$100 million under the FMO Facility (as defined below), US$155 million under the IFC facility (as defined below) along with a financing from Deutsche Bank for up to US$44 million (as defined below). The increase in borrowings was partially offset by the payment of current borrowings for the fiscal year ended November 30, 2016.
Year Ended November 30, 2015 Compared to Year Ended November 30, 2014
Net cash generated from financing activities for the fiscal year ended November 30, 2015 increased AR$1,101 million from AR$(74) million for the fiscal year ended November 30, 2014 to AR$1,027 million for the fiscal year ended November 30, 2015, primarily attributable to an increase in borrowings of AR$1,715 million in order to meet increased working capital needs, primarily related to our Agro-Services and Sustainable Sourcing Segment, including through the use of the consolidated special purpose trusts described in "Consolidated Special Purpose Trusts". This increase in borrowings was partially offset by a AR$151 million increase in interest paid for the fiscal year ended November 30, 2015 as compared to the fiscal year ended November 30, 2014, and by the distribution of dividends in the amount of AR$16 million in the 2015 fiscal year.
Capital Expenditures
We expect our capital expenditures in 2017 and 2018 will be related to investment in our operations and equipment and investment in our plant facilities. However, as of the date of this
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prospectus, the company has made no material commitment towards any specific capital expenditures and is still actively evaluating its various capital expenditure options for the coming years.
Our capital expenditures during the last three years mainly consisted of acquiring production facilities, transforming and upgrading and maintaining our production facilities. Our capital expenditures related to the acquisition and maintenance of our land and equipment was AR$605 million, AR$393 million and AR$1,964 million during the fiscal years ended November 30, 2014, 2015 and 2016, respectively.
Indebtedness
In addition to cash flow from our operations, we also rely on external borrowings in the local Argentinean and international financial markets. The costs associated with using external sources of financing will depend on financial and operating ratios required by each of our lenders and also on our credit ratings. Currently, our local credit ratings from Fitch are A for our bonds and commercial paper, with a stable outlook in each case.
Given that prices in our business follow fluctuations of prices of agricultural products which are denominated in U.S. dollars, a significant portion of our indebtedness is denominated in U.S. dollars.
As of November 30, 2016, 40% of our total debt was at fixed rates of interest, primarily as a result of our fixed rate bank loans and the remaining 60% of our total debt was at floating or variable rates of interest mostly based on the London Interbank Offered Rate, or LIBOR. As of such date, 4% of our total debt was denominated in Pesos and the remaining 96% was denominated in U.S. Dollars.
The table below illustrates our outstanding indebtedness (including maturity profile) as of November 30th of each of the periods indicated:
|
As of November 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-current
|
2016 | 2016 | 2015 | 2014 | |||||||||
|
(in thousands of US$)(2) |
(in thousands of Pesos) |
|||||||||||
Bank borrowings |
391,235 | 6,208,904 | 1,215,379 | 1,222,099 | |||||||||
Obligations under finance leases |
1,602 | 25,419 | 465 | 2,111 | |||||||||
| | | | | | | | | | | | | |
Total(1) |
392,837 | 6,234,323 | 1,215,844 | 1,224,210 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Current
|
2016 | 2016 | 2015 | 2014 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands of US$) |
(in thousands of Pesos) |
|||||||||||
Bank borrowings |
248,620 | 3,945,596 | 2,071,284 | 952,231 | |||||||||
Debt certificates |
| | 302,093 | 169,881 | |||||||||
Discounted notes |
11,626 | 184,506 | 1,518,667 | 1,002,047 | |||||||||
Obligations under finance leases |
921 | 14,623 | 6,948 | 3,894 | |||||||||
| | | | | | | | | | | | | |
Total |
261,167 | 4,144,725 | 3,898,992 | 2,128,053 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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As of May 31, 2017, we have AR$2,554 million (US$165 million) available for borrowing under our existing credit facilities. The following chart indicates our availability under these facilities:
Bank Facility
|
Amount available |
|||
---|---|---|---|---|
|
(in thousands of US dollars) |
|||
BAF Capital |
50,000 | |||
HSBC |
22,000 | |||
Natixis |
25,000 | |||
BBVA Frances |
20,000 | |||
Banco Galicia |
24,000 | |||
Credit Agricole |
15,000 | |||
Banco Industrial de Azul |
2,000 | |||
Banco de la Pampa |
2,000 | |||
| | | | |
Total available credit |
160,000 | |||
| | | | |
Non-Current or Long-term Debt. Our Non-Current or Long-Term debt increased by AR$5,018 million from AR$1,216 million as of November 30, 2015, to AR$6,234 million as of November 30, 2016, primarily due to the devaluation of the Peso by 59% for the year ended November 30, 2016 and the incurrence of additional financing under the IFC Facility on April 16, 2016 and on September 28, 2016. Our long-term debt of AR$6,234 million (US$402.7 million) as of November 30, 2016 included the following material indebtedness:
Deutsche Bank Loan
On July 26, 2013, we, as the borrower, in connection with the acquisition of certain machinery, entered into a loan agreement with Deutsche Bank Aktiengesellschaft, Frankfurt am Main, which we refer to as Deutsche Bank, as lender pursuant to which Molino Cañuelas S.A.C.I.F.I.A. incurred US$8 million and the U.S. Dollar equivalent of EUR26 million in debt. On July 26, 2013, Molino Cañuelas S.A.C.I.F.I.A. entered into an amendment with Deutsche Bank which included the addition of certain customary financial covenants described below. Subsequently on November 1, 2016, the loan agreement was further amended and the total principal amount of the facility adjusted to US$6 million and the U.S. Dollar equivalent of EUR29 million. We refer to the loan as amended and restated as the Deutsche Bank Loan.
The Deutsche Bank Loan bears interest at a variable rate equal to LIBOR plus 2.3% per year to be repaid on a semi-annual basis in 16 equal consecutive installments of the principal and interest owed commencing June 1, 2016.
The Deutsche Bank Loan contains certain customary financial covenants and restrictions, which require us, to meet pre-defined financial ratios, among other restrictions.
The following financial ratios shall be maintained by us and our subsidiaries:
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net income plus interest expenses, applicable taxes on a consolidated basis, depreciation and amortization on a consolidated basis, any unusual, non-recurring or extraordinary losses or expenses minus any extraordinary gains realized other than in the ordinary course of business.
The Deutsche Bank Loan contains certain other customary provisions, including a provision for the suspension of disbursements and the immediate acceleration for any failure to pay other indebtedness when such indebtedness is more than 30 days past due and exceeds US$5 million. Similarly, any exceptional circumstances that may imperil, delay or limit our contractual obligations may also be grounds for a suspension of disbursement and immediate acceleration.
The obligations under the Deutsche Bank Loan are secured by an Argentinian law pledge on certain machinery acquired using funds from the Deutsche Bank Loan and located at our Spegazzini facility. In addition, the Deutsche Bank Loan also benefits from a guarantee dated by our subsidiary Molino Cañuelas S.A., an Uruguayan Sociedad Anónima, which we refer to as the Deutsche Bank Guarantee. Under the terms of the Guarantee, Molino Cañuelas S.A. is required to comply with certain customary covenants including a requirement that Molino Cañuelas S.A.'s obligation under the Deutsche Bank Guarantee rank at least equal at all times with all of its other existing and future unsubordinated external indebtedness.
As of the date of this prospectus, we have been in and are in compliance with all financial ratios and covenants under the Deutsche Bank Loan, except that we sought and obtained a waiver from Deutsche Bank for compliance with the financial ratios listed below with respect to the semi-annual fiscal period ended May 31, 2017:
In each case, these financial ratios were adversely affected by certain transactions forming part of the Reorganization and our use of existing credit facilities and incurrence of debt in connection with payments related to these transactions.
FMO Facility
On December 3, 2015, Compañía Argentina de Granos S.A., as the original borrower, entered into a pre-export finance term facility loan agreement with the Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V., which we refer to as FMO, as lender pursuant to which Compañía Argentina de Granos S.A. incurred debt in the form of a US$40 million A loan and a US$60 million B loan, for a total of US$100 million outstanding. In anticipation of the Reorganization, on December 1, 2016, the FMO facility was amended and restated and we assumed all of the rights and obligations of Compañía Argentina de Granos S.A. We refer to the above facility as amended and restated as the FMO Facility.
The FMO Facility bears interest for the A loan at a variable rate equal to LIBOR plus 5.8% per year prior to the implementation of certain corporate governance standards and Libor plus 5.6% thereafter and for the B loan at a variable rate equal to LIBOR plus 5.3% per year. Each A loan is payable in nine equal installments of the principal owed, with the first installment paid on January 10, 2016 with interest and principal payments due on each January 10, April 10, July 10 and October 10. Each B loan is loan is payable in seven equal installments of the principal owed, with the first installment paid on January 10, 2016 with interest and principal payments due on each January 10, April 10, July 10 and October 10. As of the date of this prospectus we have not implemented the corporate governance standards required to benefit from the reduced LIBOR margin.
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The FMO Facility contains certain customary financial covenants and restrictions, which require us to meet pre-defined financial ratios, among other restrictions. The FMO Facility also contains restrictions on the payment of dividends. We may not pay dividends unless we maintain a solvency ratio greater than 20% on November 30 of each year and 15% on May 31 of each year, as the case may be and such dividend payment does not result in an event of default. Any payment of dividends in excess of 100% of the aggregate amount available for distribution is not permitted.
The FMO Facility requires us to maintain the following financial ratios:
In addition, pursuant to the FMO Facility, we shall not incur any financial debt with third parties other than for purposes of financial debt incurred for our working capital or capital expenditure needs.
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Under the FMO Facility, we are also prohibited from engaging in asset sales outside of the ordinary course of business or without the consent of FMO if such sale, lease or transfer exceeds 20% of our net equity at the time of the sale, lease or transfer.
Under the FMO Facility, our failure to pay any financial indebtedness or if such financial indebtedness becomes due and payable or is cancelled prior to maturity due to a default, can result in acceleration of the full outstanding loan amount due to the lender.
The obligations under this facility are secured by certain accounts and other instruments related to certain designated export sales contracts pursuant to a security and accounts control agreement among FMO, Molino Cañuelas S.A.C.I.F.I.A., as borrower, and Itaú Unibanco S.A. as collateral agent and depositary bank entered into on December 1, 2016. These designated export sales contracts correspond to contracts for the sale of agricultural products by our Agro-Services and Sustainable Sourcing Segment from a set of eligible off-takers that meet certain criteria (including the direct payment of any proceeds into a collection account and the notification of the Collateral Agent of their intention to designate these contracts). As part of its obligations under the account control agreement, the aggregate collateral value of the designated sales contracts in the collection account must be equal to 120% of the value of any outstanding loans under the FMO Loan.
As of the date of this prospectus, we have been and are in compliance with all financial ratios and covenants under the FMO Facility, except that we sought and obtained a waiver from FMO for compliance with the financial ratio listed below with respect to the semi-annual fiscal period ended May 31, 2017:
The Current Ratio was adversely affected by certain transactions forming part of the Reorganization and our use of existing credit facilities and incurrence of debt in connection with payments related to these transactions.
IFC Facility
On April 16, 2016, we, as borrower, Cañuelas Pack S.A., as guarantor, and the International Finance Corporation, as lender, entered into a loan agreement pursuant to which we incurred debt in the form of an A loan, which we refer to as the A-1 loan, of up to US$30 million and a B loan, which we refer to as the B-1 loan, of up to US$50 million. In addition, on September 28, 2016, the Company and the IFC amended and restated the loan and negotiated the incurrence of an additional US$75 million loan, which consists of an additional A loan, which we refer to as the A-2 loan, of up to US$30 million and an additional B loan, which we refer to as the B-2 loan, of up to US$45 million. We refer to the above facility as amended and restated as the IFC Facility.
The IFC Facility bears interest for the A loans at a variable rate equal to LIBOR plus 5.5%, and for the B loans at a variable rate equal to LIBOR plus 5%. The A-1 and A-2 loans are due on March 15, 2024 and September 15, 2024, respectively, and payable in 13 semi-annual installments amounting to 1/13 of the principal owed each, with the first installment payable March 15, 2018 and September 15, 2018, respectively. The B-1 and the B-2 loans are due on March 15, 2021 and September 15, 2021 and payable in eight semiannual installments amounting to 1/8 of the principal owed each, with the first installment payable September 15, 2017 and March 15, 2018, respectively.
The IFC Facility contains certain customary financial covenants and restrictions, which require Molino Cañuelas S.A.C.I.F.I.A. and Cañuelas Pack S.A., as guarantor, to meet pre-defined financial ratios, among other restrictions. The IFC Facility also contains restrictions in payment of dividends contingent on maintaining compliance with these customary ratios and covenants as of the proposed
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date of the dividend payment and on the absence of a default or event of default as defined under the IFC Facility.
The following financial ratios shall be maintained by us and our subsidiaries:
In addition, pursuant to the IFC Facility, we or Cañuelas Pack S.A. may not incur in any financial debt with third parties, provided that certain customary exceptions apply. Among these exceptions, new financial debt may be incurred if either Cañuelas Pack S.A. or we are in compliance with the aforementioned financial ratios, and the following ratios are duly complied with:
Under the IFC Facility, the failure of our or any of our subsidiaries, including Cañuelas Pack S.A. as our guarantor, to pay any liabilities with an aggregate principal amount over US$5.0 million can result in acceleration of the full outstanding loan amount due to the lender. Default of any obligations under the agreements pursuant to which the aforementioned liabilities are outstanding shall also constitute a default under the IFC Facility.
Our obligations under this facility are secured by a mortgages over Adelia Maria, Cañuelas, Spegazzini, Rosario and Pilar facilities as well as a pledges over the movable assets located therein.
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Our affiliate, Cañuelas Pack S.A., is a guarantor and primary obligor under the IFC Facility, is a guarantor under the IFC Facility, and is required to maintain on a consolidated basis and at all times (i) financial debt outstanding, as defined in the IFC Facility, of not more than US$5.0 million; (ii) tangible net worth, as defined in the IFC Facility, of at least US$5.0 million.
As of the date of this prospectus, the Company and Cañuelas Pack are and have been in compliance with all financial ratios and covenants under the IFC Facility, except that we sought and obtained a waiver from the IFC in connection with the ratios listed below for the fiscal quarter ended November 30, 2016:
In each case, these ratios were negatively affected by both the devaluation of the Peso during the fiscal year ended November 30, 2016 and the inclusion of only three months of EBITDA from the assets acquired in the Cargill Acquisition during the same period. In addition, we are currently seeking a further waiver from the IFC in connection with the aforementioned ratios for the fiscal quarter ended May 31, 2017 along with certain other covenants. These ratios and covenants were adversely affected by certain transactions forming part of the Reorganization and our use of existing credit facilities and the incurrence of debt in connection with payments related to these transactions. While we believe that the IFC is likely to grant a waiver in respect of these ratios and covenants, we cannot assure you that this will be the case. For further information see, "Risk FactorsRisks Related to our BusinessWe have a substantial amount of indebtedness, which could limit financing and other options and in some cases adversely affect our ability to pay dividends." For further information, see Note 16 to our audited consolidated combined financial statements.
Rabobank Facility
On November 12, 2014, we and Compañía Argentina de Granos S.A., as borrowers, entered into a pre-finance for export facility with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., or Rabobank Nederland, New York Branch, as lender. The Rabobank Facility was granted to us in an amount of US$35 million and to Compañía Argentina de Granos S.A. in an amount of US$25 million. The Rabobank Facility bears interest at a variable rate equal to LIBOR plus 5.57% for Compañía Argentina de Granos S.A., and of LIBOR plus 5.50% for us. We used part of the proceeds from the amended and restated IFC Facility described above to repay the Rabobank Facility on November 15, 2016.
Pre-Export Credit Agreement
On January 31, 2017 Molino Cañuelas S.A.C.I.F.I.A. as borrower, entered into a pre-export credit agreement, or PEC Agreement, with a group of lenders, including Itaú Unibanco S.A., Nassau Branch, and JPMorgan Chase Bank, N.A., pursuant to which we incurred debt in the form of a series of loans totaling US$70 million. On May 31, 2017, Molino Cañuelas S.A.C.I.F.I.A. entered into an amendment with the lenders under the pre-export credit agreement that changed the first test date for the consolidated leverage ratio, consolidated current ratio and consolidated total net indebtedness covenant, each as defined below, from May 31, 2017 to November 30, 2017. We refer to the pre-export credit agreement, as so amended, as the PEC Agreement.
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Loans under the PEC Agreement bear interest at a variable rate equal to LIBOR plus 6.5% per year. Principal under the PEC Agreement is payable in nine semi-annual installments, commencing on February 3, 2018. Interests are also paid on a semi-annual basis, commencing on August 3, 2017.
The PEC Agreement contains certain customary financial covenants and restrictions, which require us to meet pre-defined financial ratios, among others. The PEC Agreement also restricts our ability to pay dividends unless (i) such payments are in the form of cash dividends by us to our shareholders solely out of our and our subsidiaries' net income as available for distribution in accordance with Argentine GAAP, and (ii) no event of default would result from such dividend payment.
The PEC Agreement also requires us to maintain the following financial ratios:
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Under the PEC Agreement, we and our subsidiaries are also prohibited from engaging in asset sales outside of the ordinary course of business or without the consent of the lenders if such sale, lease or transfer exceeds at any time, individually or in the aggregate, US$20 million.
Under the PEC Agreement, our and our subsidiaries' failure to pay in respect to any indebtedness when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in an amount equal to or greater than US$5 million, can result in acceleration of the full outstanding loan amount due to the lenders.
The obligations under this facility are secured by certain designated export sales contracts pursuant to bank account control agreements and fixed charge over account agreements entered into by us, as borrower, and Molino Americano S.A., with Itaú Unibanco S.A., Nassau Branch as collateral agent and depositary bank. These designated export contracts correspond to contracts for the sale of agricultural products by our Agro-Services and Sustainable Souring Segment from a set of eligible off-takers that meet certain criteria, and which pay any proceeds directly into a collection account.
As of the date of this prospectus, we have been and are in compliance with all financial ratios and covenants under the PEC Agreement.
Current or Short-term Debt
Our short-term debt increased by AR$246 million from AR$3,898 million as of November 30, 2015 to AR$4,144 million (US$261 million) as of November 30, 2016, primarily due to the December 17, 2015 devaluation of the Peso by nearly 30%, which was partially offset by the improvement in working capital as a result of increased financing by the suppliers of the farming products and services we sell to our farmers.
We maintain uncommitted lines of credit with several banks in order to finance our working capital requirements. We believe that we will continue to be able to obtain additional credit to finance our working capital needs in the future based on our past track record and current market conditions. For further information regarding our indebtedness, see Note 15 to our audited consolidated combined financial statements contained elsewhere in this prospectus.
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Contractual Commitments
The following table summarizes our significant contractual obligations and commitments as of November 30, 2016 that have an impact on our liquidity:
|
Payments due by Period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Obligations
|
Total | Less than 1 year | 1 - 2 years | 2 - 5 years | More than 5 years |
|||||||||||
|
(in thousands of Pesos) |
|||||||||||||||
Total Borrowings |
11,802,700 | 4,527,903 | 1,479,252 | 4,495,912 | 1,299,633 | |||||||||||
| | | | | | | | | | | | | | | | |
Capital Payments |
10,154,500 | 3,945,596 | 1,096,162 | 3,880,649 | 1,232,094 | |||||||||||
Interest Payments |
1,648,201 | 582,307 | 383,091 | 615,263 | 67,540 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating Lease Obligations |
N/A | N/A | N/A | N/A | N/A | |||||||||||
Capital (Finance) Lease Obligations |
40,042,754 | 14,623,028 | 9,766,274 | 15,653,452 | | |||||||||||
Purchase Obligations |
6,341,881 | 6,152,841 | 189,040 | | | |||||||||||
Other Long-Term Liabilities |
N/A | N/A | N/A | N/A | N/A | |||||||||||
Total |
57,675,487 | 26,493,928 | 10,623,862 | 19,263,225 | 1,294,472 | |||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Capital Management and Funding Policies
As a fundamental pillar of our strategy, we have established a commitment to maintaining a conservative financial policy that seeks to maximize the returns of our shareholders while maintaining healthy capital ratios and a solid credit rating.
Among the policies we have adopted to achieve these objectives are the following:
Using these policies we seek to maintain a healthy mix of debt and equity that satisfies our existing ratios and permits us to continue receiving good credit ratings from international agencies.
Consolidated Special Purpose Trusts
We have securitized certain of our accounts receivable consisting of deferred payment checks and credit invoices for sales of agro-inputs, farming products and services which were originated by our agro-services business through the transfers of such accounts receivable to four special purpose trusts named CAGSA I, CAGSA II, FACTURAS IV and FACTURAS V. We refer to these entities collectively as the Special Purpose Trusts. The Special Purpose Trusts have issued debt certificates and equity participation in the local Argentinean market.
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The following table provides selected information relating to the Special Purpose Trusts:
Name of Financial Trust
|
Date of Organization |
Value initially assigned to the trust |
Nominal Value of Securities issued (maturity) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
(in millions of Pesos) |
(in millions of Pesos) |
|||||||
|
Debt Certificate | Equity Participation Certificates | ||||||||
CAGSA I |
02/10/2011 | 74,933 | 74,933 | | ||||||
CAGSA II |
02/10/2011 | 43,071 | 43,071 | | ||||||
FACTURAS IV |
09/07/2015 | 164,285 | 129,128 | 35,157 | ||||||
FACTURAS V |
09/22/2015 | 207,145 | 165,716 | 41,429 |
Our consolidation of the Special Purpose Trusts into our financial statements is based upon our control over the entities. In determining our control over the Special Purpose Trusts we have examined:
Based on these considerations we have determined that we have control of these Special Purpose Trusts. We control these Special Purpose Trusts when we are exposed to, or have rights to, variable returns from our involvement with the entity and when we have the ability to affect those returns through our ability to direct the activities of the entity.
The table below presents the carrying amount and classification of the Special Purpose Trusts' assets and liabilities which have been consolidated as of November 30, 2015 and 2014. The consolidated four financial trusts which existed as of November 30, 2015 and 2014 were liquidated during the fiscal year ended November 30, 2016. We discontinued this practice as a means of financing during the year ended November 30, 2016 as a result of the relative increase in financial costs associated with such types of securitization transactions. As such, we no longer have any interests in any trusts as of November 30, 2016.
|
As of November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Assets |
||||||||||
Accounts receivable |
| 468,149 | 176,162 | |||||||
Investments |
| 16,086 | 6,899 | |||||||
Cash and cash equivalents |
| 5,366 | 990 | |||||||
| | | | | | | | | | |
Total Assets |
| 489,601 | 184,051 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities |
||||||||||
Debt certificates |
| 489,434 | 183,858 | |||||||
Other Accounts payable |
| 167 | 193 | |||||||
| | | | | | | | | | |
Total Liabilities |
| 489,601 | 184,051 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Quantitative and Qualitative Disclosure About Market Risk
In the normal course of business, we are exposed to commodity price, interest rate and exchange rates risks, primarily related to our Agro-Services and Sustainable Sourcing segment and also has a significant impact on our Branded Industrial Products and Retail Products segments. We manage our
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exposure to these risks through the use of certain natural hedges and financial instruments, none of which are entered into for trading purposes. We have established policies and procedures governing the use of financial instruments, specifically as they relate to the type and volume of such financial instruments. Our use of financial derivatives instruments is associated with our core business and is regulated by internal control policies.
The following discusses our exposure to these risks. This discussion contains forward-looking statements that are subject to risks and uncertainties. Our actual results could vary materially as a result of a number of factors including those set forth in the risk factors section of this prospectus. Uncertainties that are either non-financial or unable to be quantified, such as political, economic, tax, other regulatory, or credit risks, are not included in the following assessment of our market risks.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We seek to manage interest rate risk by (i) maintaining a balanced mix between fixed and variable loans and (ii) maintaining a balanced mix between foreign and local currency debt and operations with pre-financed exports.
The analysis at fiscal year-end is as follows:
Fixed rate borrowings:
|
As of the Fiscal Year Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|
||||||||
Peso |
223,117 | 3,119,738 | 1,540,660 | |||||||
U.S. Dollar |
3,942,616 | 615,343 | 628,150 | |||||||
Other currencies |
| 22,517 | 17,069 | |||||||
| | | | | | | | | | |
|
4,165,733 | 3,757,598 | 2,185,879 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Variable rate borrowings:
|
As of the Fiscal Year Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
Peso |
148,578 | 476,644 | 318,713 | |||||||
U.S. Dollar |
6,064,738 | 880,594 | 847,671 | |||||||
| | | | | | | | | | |
|
6,213,315 | 1,357,238 | 1,166,384 | |||||||
| | | | | | | | | | |
Total borrowings |
10,379,048 | 5,114,836 | 3,352,263 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
We may be subject to adverse interest rate risks as a result of macro-economic conditions increasing short term rates.
Sensitivity to Interest Rate Risk
During the fiscal years ended November 30, 2014, 2015 and 2016 an increase (decrease) in 1 percentage point in the LIBOR rate related to the portion of financial liabilities with variable interest rate and considering all other variables would have resulted in an increase (decrease) in the profit for the year of AR$8.5 million, AR$8.8 million, and AR$60.6 million, respectively.
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Exchange Rate Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. Our exposure to foreign currency risk is mainly related to our exports and sales of agricultural products in Argentina impacted by foreign currency (the price of agricultural products we sell in Argentina are related U.S. Dollar prices in international markets). Therefore our financial assets and liabilities in foreign currency (trade receivables inventories and debt with financial institutions) mainly relate to those activities. In order to minimize foreign currency risk, we seek to maintain a balanced position between our current assets (including inventories) and current liabilities.
We have liabilities denominated in U.S. Dollars, which expose us to foreign currency exchange risks. Such risks are mitigated by our revenues, which are also partly denominated in U.S. Dollars (mainly exports) or Pesos but routinely adjusted to reflect changes in agricultural product prices which are priced in U.S. Dollars and therefore subject us to the devaluation of the Peso against the U.S. Dollar. We periodically evaluate the use of swaps and other financial instruments, but do not have any exchange rate related financial instruments in place.
The following table shows the net monetary position of our non-Argentine Pesos balances. Non-Peso amounts are presented in thousands of Pesos for purpose of these tables:
November 30, 2016 Net monetary position Asset / (Liability) |
US$ | EUR | BR$ | Other currencies |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
2,295,635 | 100 | 38,492 | 7,031 | 2,341,258 | |||||||||||
Trade and other receivables, net |
272,055 | | 160,255 | 50,638 | 482,948 | |||||||||||
Trade and other payables |
(1,215,316 | ) | (68,249 | ) | (63,143 | ) | (87,885 | ) | (1,434,593 | ) | ||||||
Borrowings |
(10,007,354 | ) | | | | (10,007,354 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(8,654,980 | ) | (68,149 | ) | 135,604 | (30,216 | ) | (8,617,741 | ) | |||||||
Inventories |
2,482,355 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
(6,135,386 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
November 30, 2015 Net monetary position Asset / (Liability) |
US$ | EUR | BR$ | Other currencies | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
356,497 | | 27,516 | 5,441 | 389,454 | |||||||||||
Trade and other receivables, net |
320,298 | | 70,327 | 50,521 | 441,146 | |||||||||||
Trade and other payables |
(532,902 | ) | (38,684 | ) | (17,522 | ) | (32,823 | ) | (621,931 | ) | ||||||
Borrowings |
(1,495,937 | ) | | (5,519 | ) | (16,998 | ) | (1,518,454 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(1,352,044 | ) | (38,684 | ) | 74,802 | 6,141 | (1,309,785 | ) | ||||||||
Inventories |
1,536,537 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
226,752 | |||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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November 30, 2014 Net monetary position Asset / (Liability) |
US$ | EUR | BR$ | Other currencies | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
28,866 | | 17,131 | 1,425 | 47,422 | |||||||||||
Trade and other receivables, net |
147,932 | | 78,257 | 96,346 | 322,535 | |||||||||||
Trade and other payables |
(549,239 | ) | (12,708 | ) | (19,925 | ) | (47,003 | ) | (628,875 | ) | ||||||
Borrowings |
(1,475,821 | ) | | | (17,069 | ) | (1,492,890 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(1,848,262 | ) | (12,708 | ) | 75,463 | 33,699 | (1,751,808 | ) | ||||||||
Inventories |
1,290,999 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
(460,809 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Sensitivity to Exchange Rates
As of November 30, 2014, 2015 and 2016 a 1% devaluation (revaluation) effect of the Peso considering all other variables constant would have resulted in an immediate increase (decrease) in profit for the year of AR$15.8 million, AR$10.4 million and AR$80.4 million, respectively, and an increase (decrease) in other comprehensive income of AR$1.8 million, AR$2.7 million and AR$5.7 million respectively.
Commodity Price Risk and Derivative Financial Instruments
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. As a result of our activities, our performance is mainly exposed to the volatility of the international prices of wheat, sunflower seeds, soybean, and corn. In order to mitigate this risk, we (i) monitor on a regular basis the commercial position of agricultural products and take actions to maintain a natural balanced position, and (ii) trade (purchase and sale of agricultural products) in futures markets. We use derivative instruments to hedge risks arising out of our core agricultural operations. We use a variety of commodity-based derivative instruments to manage our exposure to price volatility stemming from our integrated crop production activities. These instruments consist mainly of crop future contracts. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, we have assumed the risk that might arise from the possible inability of our counterparties to meet the terms of their contracts. We do not currently use hedge accounting.
Commodity Price Risk
As of November 30, 2014, 2015 and 2016 a 1% increase (decrease) of the international prices related to sunflower and soybean considering all other variables constant would have resulted in an increase or decrease of the profit for the year of AR$6.9 million, AR$8.9 million and AR$17.5 million, respectively.
We only utilize derivatives for purposes of economic hedging and not as speculative investments. However, where derivatives do not meet hedging criteria, they are classified as "fair value through profit or loss" for accounting purposes. We have the following derivative financial instruments:
|
As of the Year Ended November 30, |
As of December 1, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | 2013 | |||||||||
Current assets: |
|||||||||||||
Commodity future contracts |
315,164 | 211,321 | 158,633 | 69,471 | |||||||||
Current liabilities: |
|||||||||||||
Commodity future contracts |
1,154 | 1,365 | 27,479 | 1,310 |
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Derivative financial instruments involve, to a varying degree, elements of market and credit risk that may not be recognized in our audited consolidated combined financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to our futures and options contracts generally are large institutions with credit ratings equal to or higher than ours. We continually monitor the credit rating of such counterparties and seek to limit our financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of our exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of our counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties' obligations under the contracts exceed our obligations to the counterparties.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our existing liabilities. Liquidity risk is monitored periodically by our risk oversight committee which seeks to minimize this risk by maintaining sufficient cash and available credit lines to meet our commercial and financial obligations with suppliers and financial institutions. We maintain sufficient cash and readily saleable assets meet our current financial liabilities.
We believe that our liquidity risk is low because funding sources are reasonably assured and our short-term debt could be repaid or refinanced with assets and cash that are readily available.
The tables below analyzes our non-derivative and derivate financial liabilities as of December 1, 2013 and November 30, 2014, 2015 and 2016 into relevant maturity groupings based on the remaining period to the contractual maturity date at the date of the statement of financial positions. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables when discounting is not applied. For a further description of all of our contractual obligations and financial liabilities as of November 30, 2016, see "Contractual Commitments".
November 30, 2016
|
1 year | 1 - 2 years | 2 - 5 years | > 5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands of Pesos) |
||||||||||||
Trade and other payables |
6,162,841 | 189,041 | | | |||||||||
Derivatives |
1,154 | | | | |||||||||
Borrowings |
4,801,518 | 1,411,439 | 4,480,661 | 1,299,627 | |||||||||
| | | | | | | | | | | | | |
|
10,965,513 | 1,600,480 | 4,480,661 | 1,299,627 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
November 30, 2015
|
1 year | 1 - 2 years | 2 - 5 years | > 5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands of Pesos) |
||||||||||||
Trade and other payables |
3,964,554 | 13,850 | | | |||||||||
Derivatives |
1,365 | | | | |||||||||
Borrowings |
4,162,042 | 791,168 | 682,717 | 55,517 | |||||||||
| | | | | | | | | | | | | |
|
8,127,961 | 805,018 | 682,717 | 55,517 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
November 30, 2014
|
1 year | 1 - 2 years | 2 - 5 years | > 5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands of Pesos) |
||||||||||||
Trade and other payables |
3,285,529 | 72,760 | | | |||||||||
Derivatives |
27,479 | | | | |||||||||
Borrowings |
2,264,895 | 880,393 | 423,140 | 116,634 | |||||||||
| | | | | | | | | | | | | |
|
5,577,903 | 953,153 | 423,140 | 116,634 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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December 1, 2013
|
1 year | 1 - 2 years | 2 - 5 years | > 5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands of Pesos) |
||||||||||||
Trade and other payables |
1,887,736 | 13,498 | | | |||||||||
Derivatives |
1,310 | | | | |||||||||
Borrowings |
2,423,854 | 443,800 | 174,685 | 61,743 | |||||||||
| | | | | | | | | | | | | |
|
4,312,900 | 457,298 | 174,685 | 61,743 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Credit Risk
Credit and counterparty risk is the risk of incurring losses as a result of a third party's failure to comply with its obligations to us. The financial instruments which create potential exposure to third-party credit and counterparty risk consist principally of cash and cash equivalents, accounts receivable, advanced payments made to suppliers and other receivables. We seek to mitigate our exposure to credit risk by:
Our allowance for doubtful or past due accounts is based upon an analysis that takes into account objective evidence that we will not be able to collect all amounts due in accordance with the original terms of the receivables or agreement with our customers. As part of this analysis our management considers all available evidence (including any delinquency in payments, aging of accounts, our historic loss experience and a particular customer's creditworthiness or changes in payment habits) in determining when a receivable is impaired. As of December 1, 2013 and November 30, 2014, 2015 and 2016, the allowance for doubtful accounts represented 1%, 1%, 2% and 1% of our total trade receivables, respectively.
For further discussion on our policy, please refer to note 2 of our audited consolidated combined financial statements and see "Critical Accounting PoliciesProvision for doubtful accounts receivable".
Off-balance Sheet Arrangements
For the periods presented, we did not have any off-balance sheet transactions, arrangements or obligations with unconsolidated entities or otherwise.
Recent Accounting Pronouncements
IAS 7 "Statement of Cash Flows": In February 2016, the IASB issued certain amendments regarding disclosures to be made in the Statement of Cash Flow.
Modifications to the Disclosure Initiative (Amendments to IAS 7) are intended to disclose information to enable users of financial statements to evaluate changes in liabilities arising from financing activities. For this, the IASB requires that the following changes in liabilities arising from financing activities be disclosed: (i) changes in the cash flows from financing activities; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in
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exchange rate variation; (iv) changes in fair values; and (v) certain other changes. Finally, the amendments state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.
These changes will become effective for annual periods beginning on or after January 1, 2017, with early adoption permitted.
IFRS 16 "Leases": In January 2016, the IASB issued IFRS 16 "Leases" which establishes the new model for the registration of leasing transactions. This norm repeals the current guidelines for accounting for such transactions in IAS 17 "Leases" and related interpretations when it becomes effective. IFRS 16 is applicable for annual periods beginning on or from January 1, 2019, with early adoption permitted. Adoption is retroactive.
IAS 12 "Income Taxes": In January 2016, the IASB issued certain amendments related to the recognition of deferred tax assets for unrealized losses. These changes will be effective for annual periods beginning on or after January 1, 2017, with early adoption permitted.
IFRS 15 "Revenue from contracts with customers" In May 2014, the IASB issued IFRS 15, which was amended in April 2016. This norm is applicable for annual periods beginning January 1, 2018. It specifies how and when revenue is recognized, as well as the additional information that must be presented in the financial statements. The standard provides a unique five-step model based on principles that apply to all contracts with customers. We are currently performing a full assessment of the impact of IFRS 15, which will be effective for our fiscal year ending November 30, 2019.
IFRS 9 "Financial Instruments": In July 2014, the IASB issued an amendment to IFRS 9. It includes in one place all phases of the IASB project to replace IAS 39 "Financial Instruments: Recognition and Measurement". These phases are the classification and measurement of instruments, impairment and hedge accounting. This version adds a new impairment model based on expected losses and some minor modifications to the classification and measurement of financial assets. The new standard replaces all previous versions of IFRS 9 and is effective for periods beginning on or after January 1, 2018. As at December 1, 2013, our transition date to IFRS, we had adopted the first phase of IFRS 9 and we are currently analyzing the impact of the second and third phases.
IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture": In June 2014, the IASB issued an amendment to IAS 16 and IAS 41. The amendment introduced modifications to the registration model of "production facilities" which must be accounted for similarly to elements of property, plant and equipment, their schemes comparable productive operation. The "production facilities" are defined as living plantations that are used in the production or supply of agricultural products and primary food products, for over a year and with remote chances of being sold or marketed as agricultural products and primary food products. Those amendments require that the "production plants" are recorded as elements of "Property, plant and equipment" under the scope of IAS 16, keeping agricultural products developed in them within the scope of IAS 41. These regulatory changes are effective for annual periods beginning on or after January 1, 2016 and may be applied in advance. This modification will not be applicable us.
IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets": In May 2014, the IASB issued an amendment to IAS 16 and IAS 38. The amendment introduced changes to acceptable methods of depreciation and amortization. It clarifies that it is not appropriate to adopt a depreciation method that is based on revenue from ordinary business that include the use of an asset as it usually reflects factors other than the consumption of the economic benefits of the asset. It also establishes a rebuttable presumption that an amortization method that is based on the revenue generated by an activity that involves the use of an intangible asset is inappropriate. This amendment is effective for annual periods beginning on or after January 1, 2016. We have determined that this amendment will not have an impact on our business, results of operations and financial condition.
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Company Overview
We are a leading food company with top-of-mind consumer brands such as Cañuelas ( ), Pureza ( ), Florencia ( ), San Agustín ( ), 9 de Oro ( ), Paseo ( ) and Mamá Cocina ( ), in the vegetable oil, flour, biscuits, cookies and crackers, ready-mixed flours and bread crumb product categories where, according to the 2017 Nielsen Reports or the CCR Reports, we currently enjoy market shares of 26.0% (vegetable oil), 41.7% (flour), 34.1% (biscuits sub-category), 27.0% (ready-mixed product) and 25.5% (bread crumbs), respectively. Our full line of consumer products in our Retail Products segment and Branded Industrial Products segment includes over 600 products and approximately 700 stock keeping units, or SKUs, across seven different product categories.
We benefit from top-of-mind referential brands, sophisticated food development capabilities and a well-established distribution network. Our operations are supported by strategically located, modern, innovative and efficient production facilities, as well as an extensive sourcing network of farmers located throughout Argentina, one of the world's most productive agricultural areas.
We operate with the goal of adding value to agricultural products in which Argentina, our primary market and location of our principal sourcing activities, has natural competitive advantages. We achieve this through a history of continued expansion following a strategy of vertical integration. We benefit from having the largest milling capacity in Argentina, according to data from MAGyP, with an installed milling capacity of 3.13 million tonnes and, according to FAIM, we are the largest producer of wheat flour in Argentina in 2016, processing over 28.5% of wheat in Argentina and, according to Euromonitor, we are the largest exporter of wheat flour in Argentina, exporting 57.9% of the total wheat flour exported from Argentina in 2016. We market and sell our wheat flour under our Cañuelas, Pureza and Florencia brands in our Retail Products segment and under our Cañuelas, MultiHarina, Pigue and Adelia Maria brands in our Branded Industrial Products segment.
We source our agricultural products primarily from a network of more than 8,000 farmers, to whom we sell a variety of goods and services to support their production activities primarily in exchange for their agricultural products. Our sourcing activities are conducted through 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers, covering a substantial portion of Argentina's productive agricultural areas, providing us access to large quantities of high quality agricultural products.
Our operations include 21 production facilities located in Argentina, Uruguay and Brazil. We seek to market and sell our value-added retail food products across the region and take advantage of local opportunities in Uruguay, Brazil, Bolivia and Chile to expand our retail and industrial operations while relying on our competitive advantage in sourcing primary agricultural products from Argentina.
History
We were founded in 1977 with the acquisition by our principal shareholders of Molino Cañuelas S.A., a small flour mill in Cañuelas in the province of Buenos Aires. Our principal shareholders, the Navilli family, have been in the food processing and flour milling business since 1931 through the ownership and operation of Molinos Florencia in Laboulaye, Córdoba to which they later added the Molino Adelia María, Molino Pigüé, and Molino Cañuelas Salta mills, and a plant for pasta production in Rio Cuarto, Córdoba.
With the acquisition of Molino Cañuelas, we started an expansion strategy focused on adding value to agricultural products in which Argentina has a natural global competitive advantage in quality and cost, through the downstream expansion of our milling business into the development of manufactured products that are cost efficient, innovative and benefit from access to high quality inputs, technologically advanced manufacturing plants and a sophisticated distribution systems.
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In 1985, we expanded our business to the end consumer by complementing our pasta brands San Agustín and Múltiple, with the acquisition of a biscuits plant in Rosario, Santa Fe, and the launching of retail brands 9 de Oro for biscuits, Cañuelas for edible oil and Pureza for consumer flour. As our new retail brands gained market share and became leaders in their product categories, we extended the reach of our distribution capabilities to include access to the main supermarkets, retail chains and wholesale distributors.
Implementation of our strategy required a sustainable supply of, and access to quality agricultural products as well as improved costs of raw material. Our principal shareholders acquired Compañía Argentina de Granos, S.A., and began working directly with farmers by selling them agricultural inputs and offering services to support their production processes primarily in exchange for their agricultural products, thus developing a strong relationship and loyalty that resulted in giving us sustainable access to agricultural products.
In the early 1990s, with the advent of the Mercosur, we took our initial steps towards a regional expansion with the acquisition of a milling plant in Uruguay in 1994 and then later we commenced the operation of a mill in Bahia, Brazil in 2006. In 2012 and 2013 we opened subsidiaries for our commercial activities in Chile and Bolivia, respectively, where we had been selling our products for a number of years. We have successfully grown our presence in these markets since we started operations.
As a complement to our regional expansion, in 1999, our affiliate MOLCA S.A., began operation of the Las Palmas port, which provided an important logistics link for our exports and operations of our business.
Over the years, we have sought to consolidate our market position through our constant focus on quality and innovation. We have historically anticipated market trends by being first to launch innovations in our product offerings in Argentina that were later adopted by the broader market or required by law (as is the case for fortified flour in Argentina). Our brands also enjoy a premium status based on customer's perception of quality and healthiness.
In the 2000s we began to complement our production processes with the design and manufacturing of our own packaging. Through the operations of Cañuelas Pack S.A. we develop innovative packaging solutions that complement the value proposition of our food products. Our innovative packaging solutions include our vegetable oil containers with harder material and ergonomically superior containers that facilitate handing, special pouring spouts that avoid spilling and hermetic containers for our all-natural yeast flour to avoid fermentation while in storage, among others. Through the operations of Cañuelas Pack we serve our own production as well as that of other food producers.
In 2014, we made important investments in our Spegazzini facility for the production of frozen foods and introduced a new product category to capitalize on the growing adoption of convenience food formats in Argentina. Today, our Spegazzini facility boasts advanced technology in the production of frozen food products like pre-cooked pizzas, croissants and pastries, bread and our recently launched muffins and doughnuts. We sell our frozen food products through our distribution partners, including the largest supermarket chains in Argentina which also offer all of our dry-good products. In all of our retail product business lines, we complement our distribution with direct support to points of sale to end consumers, like our Puntos Caliente in supermarkets, which bake our frozen bread and pastries and sell them directly to customers in stands inside supermarkets and other retailers. We also developed direct sales to fast food restaurants. Most recently, in early 2017, we opened our first restaurant Pizza Alla Pala in Buenos Aires, where we sell our own pizza directly to customers.
In 2016, we expanded our presence in the flour milling industry through the acquisition of seven flour mills from Cargill, consolidating our market leadership to become the largest producer of wheat flour in Argentina, processing over 28.5% of total wheat in Argentina, according to FAIM. With an installed milling capacity of 3.13 million tonnes, according to MAGyP, we are uniquely positioning us to
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capitalize on future growth opportunities in the domestic and export markets. As a result of the Cargill Acquisition we have also become the number one exporter of wheat flour from Argentina, exporting 57.9% of the total wheat flour exported from Argentina in 2016.
Currently, we have more than 600 consumer products, 21 mills and food production facilities, more than 3,000 employees and a reputation for quality products among our customers and consumers.
Our Corporate Structure and the Reorganization
During the fiscal year ended November 30, 2016, and subsequent to the end of the fiscal year but prior to the effectiveness of the Global Offering, our principal shareholders elected to complete a reorganization of Molino Cañuelas S.A.C.I.F.I.A. and various other entities and businesses under the common control of our principal shareholders in order to organize all of our business activities under Molino Cañuelas S.A.C.I.F.I.A. We refer to this series of transactions as the Reorganization.
The Reorganization consists of the following transactions:
The total consideration for these acquisitions amounts to AR$7,800 million. As of November 30, 2016, we had paid AR$310 million of the foregoing amount. As of the date of this prospectus we have
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paid an additional AR$7,490 million in consideration for all of the Reorganization transactions consummated after November 30, 2016.
The assets and liabilities of the entities and businesses acquired as part of the Reorganization included in our audited consolidated combined financial statements corresponds to the historical amounts in the individual financial statements of the combined entities (i.e. predecessor values). As described elsewhere in this prospectus, any consideration given or received in relation to transactions are recognized directly in equity as withdrawals or contributions at the acquisition date. Several of the acquisitions conducted in connection with the Reorganization did not occur by the end of the fiscal year ended November 30, 2016, and, therefore, the impact of the Reorganization payments or consideration made after November 30, 2016 in connection with the Reorganization and the assets and liabilities transferred to us in connection therewith are not fully reflected in our consolidated combined statement of financial position and consolidated combined statements of equity as of and for the fiscal year ended November 30, 2016. As of November 30, 2016, the pending consideration for such transactions totaled AR$7,490 million, which we have paid in full as of the date of this prospectus. For more information on the Reorganization and the consideration provided in connection therewith, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsThe Reorganization". For a further description of the predecessor basis accounting method under IFRS used in connection with the Reorganization, see Note 2.4.4 to our audited consolidated combined financial statements.
The following charts shows our corporate structure and our material subsidiaries before and after the Reorganization:
Combined Entities Prior to the Reorganization
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Post-Reorganization Ownership Structure
Key Strengths
Referential brands and strong market share in many of our retail products. Our referential brands are among the most well-known and traditional names in Argentina. Certain of these referential brands, notably 9 de Oro, can be found in all major retailers in Argentina and, we believe as a result, in nearly every household in the country. Complementing our brand portfolio in our biscuits, cookies and crackers segment, we offer crackers under our Paseo brand and cookies under our Cukis brand. We believe our flour products sold under our market-leading brands Pureza and Cañuelas are chosen by customers for their perceived high quality and healthiness and reputation for innovation through the various types of ready-mixed flours we offer. In vegetable oils, our Cañuelas brand enjoys positioning as a premium product and is recognized for its quality, superior packaging and healthy attributes. Our ready-mixed product portfolio includes flour mixes under the Pureza and Mamá Cocina brands. Other brands include San Agustín, Florencia and Múltiple. We believe that our focus on providing consumers with products that offer them solutions helps us maintain and strengthen our brands' top-of-mind recognition. Part of our brand strength is reflected in strong market share across our various product categories. For example, in Argentina, according to the Nielsen Reports or CCR Reports, using annual market share measured through November 30, 2016, we had market shares in Argentina of 26.0%
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(vegetable oil), 41.7% (flour), 34.1% (biscuits sub-category), 27.0% (ready-mixed products) and 25.5% (bread crumbs).
Well-established distribution network for our Retail Products segment, which provides significant opportunities to expand product sales in Argentina and the region. We have developed a strong distribution network for our Retail Products segment, including major retailers in the countries in which we operate, and we believe we are able to leverage these relations to further expand regionally. We distribute our retail products through a wide variety of retail and other distribution channels, including some of the largest supermarkets in Argentina (such as Cencosud, Walmart and Carrefour), third-party distributors and other retailers such as small stores and fast food venues (including McDonald's and Subway) and gas stations (such as those owned by Shell and YPF). We believe our distribution network provides us with significant cross-selling opportunities that allow us to introduce new products under existing or new brands. For example, our distribution network allows us to launch products made from newly sourced agricultural products, such as rice crackers, and effectively reach customers. Similarly, we supply frozen food products for McDonald's in Uruguay and flour to Walmart in Chile. Moreover, we believe we have developed an extensive frozen distribution channel which includes affiliated refrigerated car services and intermediate refrigerated storage warehouses, allowing us to expand the reach of our frozen food product operations.
Well positioned to capture expected growth opportunities in Argentina and the region. We believe our strong position in all three of our business segments is driven by, among other things, the economies of scale we have achieved, our longstanding relationships with a network of suppliers and customers, our significant production and sourcing capacity, our commitment to technological development, and our experience in the food business. We regularly seek to implement technological innovations in production processes in order to improve efficiency, maintain our operational excellence and develop new solutions for our customers. As a result, we have significantly improved our productivity and operating costs in recent years as evidenced by our increased installed milling capacity and increased production capacity of our food production facilities. Our cost-effective and technologically advanced production processes make our products high quality and cost-competitive and provide stable cash-flow even during economic downturns, particularly as many of our products are basic staples of our consumers' diets.
Competitive advantage based on our access to Argentina's high quality primary agricultural products at the lowest cost. Our sourcing operations are primarily located in Argentina, which benefits from significant environmental, climatic and agricultural advantages relative to the rest of the region, including the relatively high fertility and productivity of its soil. This strategic advantage, together with the strength of our supply chain, provides us access to a stable and secure supply of high quality agricultural products at competitive prices. In addition, we believe that the scale of our sourcing and industrial food operations makes us the preferred business partner to the more than 8,000 farmers that sell their agricultural products to us and to other producers of retail products who buy our industrial food products. The scope of our sourcing capacity allows us to maximize the value of the agricultural products that we source, by directing them to the most profitable uses in our production processes and sales activities. We also benefit from our extensive infrastructure, including our conditioning and storage centers distributed across a substantial portion of Argentina's productive agricultural area.
Vertically integrated business model. Our involvement in each step of the value chain allows us to achieve economies of scale, save on costs, ensure the highest product quality and increase revenues through product innovation involving high levels of technology and automation. We also seek to enhance customer and producer loyalty through the reliability of the services offered in our sourcing business, the recognized quality of our products and the reach of our distribution network. At the same time, our vertical integration gives us a greater knowledge of trends in consumer demand and allows us to recognize market opportunities for future growth. For example, we developed a high oleic vegetable
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oil in hand with the cultivation of high oleic sunflower seeds by a select group of our most loyal farmers, which, following a testing period, was launched into production for processing in our industrial facilities. We packaged this new oil with our differentiated packaging and sold it under our well-recognized Cañuelas brand so as to offer a premium oil for health conscious customers. Similarly, our recently launched frozen food products line leverages the high quality of our flour, the advanced technology of our Spegazzini facility and the established distribution network of our existing retailers to reach end customers. The scale in every step of our production and distribution processes allows us to test new products and ideas without compromising significant additional resources and improving the speed to market and marginal returns.
Business model naturally hedged to currency fluctuations and prices of agricultural products. Historically, we have been able to increase the price of the food and agricultural products we sell to match increases, in U.S. Dollar terms, of our raw materials. As a result, prices for our retail products in our principal market of Argentina have historically recovered in U.S. Dollar terms following sharp movements in the international prices of agricultural products or the exchange rate of the Peso. These price increases have helped protect our profitability, in U.S. Dollar terms, from the effects of fluctuations in the prices of agricultural products or the devaluation of the Peso. Additionally, approximately 37% of our net sales are exports, which are priced in U.S. Dollars and based on the international prices of the agricultural products we buy.
Inelastic demand for our products. Most of our products constitute staples of the standard consumer basket of food products. As a result, demand for our products has proven to be somewhat resistant to economic downturns as demand has remained stable in spite of reduced spending power on the part of customers. Similarly, the relatively resilient demand for our products has allowed us to adjust our prices by closely following movements in prices of agricultural products, thereby helping to preserve our margins.
We benefit from an experienced management team with a successful track record of value creation. Our executive officers have extensive experience in the food industry and have a track record of improving operating efficiency and managing costs. Our management team and other professionals are highly trained, and we have a results-oriented corporate culture that is focused on reducing operating costs and increasing revenues through a continuous focus on process improvement. We operate under a group of principles and tools that we believe constitute a proven methodology to maximize management effectiveness. This process implies a long-term commitment to measure, administer and improve our main processes. The goal of this process is to meet or exceed customers' expectation with the optimal use of our resources.
Business Strategy
Our mission is to add value to the agricultural products we source in which Argentina has a natural competitive advantage compared to the region. We seek to execute our mission through a vertically integrated business model that focuses on innovation and seeks to capture market opportunities through the launch of new products and the penetration of new markets.
We believe the strength of our vertically integrated business model and our new business evaluation criteria help us to achieve synergies between our new products and our existing businesses. We aim to launch products where we can achieve cost leadership, quality recognition and a strong position in market share. The evaluation criteria that forms our business strategy framework is illustrated in the chart below.
The three growth vectors that comprise our business strategy are:
Continue to introduce new products in our existing product categories. Our research and development operations are constantly working to bring new and innovative products that leverage the strength of
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our existing brands and cost efficiencies while responding to growing consumer demand for healthy and convenient retail products. For example, we were the first Argentine food company to sell flour fortified with vitamins (before legislation was passed making it mandatory for all producers) as well as value-added flour products with natural yeast, including pre-mixed pizza dough, under our Pureza brand. Similarly, we recently launched rice crackers under our Retail Products segment to meet consumer demand while maximizing the sourcing opportunities available in our Agro-Services and Sustainable Sourcing segment. We have also launched a line of high-oleic sunflower oil which leverages the strength of our Cañuelas brand and the depth of our sourcing network. We intend to further build upon our success in the frozen food and food service business by increasing the size of our Spegazzini facility, which uses highly automated production processes. Our frozen product line is currently launching ready-made products, such as doughnuts and muffins.
Continue to diversify into new product categories by leveraging on the strengths of each of the steps of our production process. We believe that our integrated supply chain in conjunction with our experience in Retail Products allows us to successfully take new products from idea to execution phase swiftly and effectively. More recently, in 2016 we expanded into the frozen food business line through new direct-to-consumer retail products under our Mamá Cocina brand. Following construction, our Spegazzini facility started producing and commercializing frozen food products (including pre-baked bread, croissants and pizzas) through retailers and food services stores, all of which we intend to distribute through our existing frozen distribution channel.
Continue to increase our market presence in the region. We believe that our existing distribution network, our efficient production processes and high quality products make it easier for us to rollout new products in the region for which there might be significant demand. In particular, we plan to leverage our distribution network with Cencosud, Walmart and Carrefour to introduce new products in the region. Similarly, in Uruguay, we are currently present through various recognized brands and we expect to launch new retail products. In Brazil, we intend to use our experience in flour production and branded industrial products sales to commercialize branded consumer food products reformulated to match the tastes of the Brazilian market. We also plan to foster our commercial efforts in Chile and Bolivia by integrating the supply chain from our food production facilities located in the northern and western parts of Argentina and exporting tailor made products into both countries through our existing commercial offices. As part of these efforts, we will seek to leverage our existing relationships with customers with which we already do significant business in Uruguay and Chile. In addition, following the increase in milling capacity resulting from our recent Cargill Acquisition, we will seek to source more agricultural products in order to increase the production of our retail and branded industrial products and commercialize such products from our Retail Products and Branded Industrial Products segments into Brazil, Chile, Uruguay and Bolivia. In addition, we are planning the development of Five Nations Industrial Park right next to the Las Palmas port in Argentina, through which we will seek to attract businesses, such as other consumer food product producers, that may benefit from the competitive advantages created by our sourcing operations, product manufacturing capabilities, distribution network in Argentina and export capacity through the Las Palmas port. We expect to continue to identify and opportunistically open new markets in countries or regions where we believe we have commercial, productive and/or logistical competitive advantages.
Business Segments
Our business consists of three operating segments, which we refer to as our Retail Products, Branded Industrial Products and Agro-Services and Sustainable Sourcing segments. We describe each of our segments in detail below.
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The table below provides a breakdown of the net sales and Adjusted Segment EBITDA attributable to each of our business segments for the fiscal year ended November 30, 2016:
|
For the Fiscal Year Ended November 30, 2016 |
||||||
---|---|---|---|---|---|---|---|
|
Net Sales | Adjusted Segment EBITDA |
|||||
|
(in thousands of Pesos) |
||||||
Business Segment |
|||||||
Retail Products |
3,717,638 | 568,793 | |||||
Branded Industrial Products |
12,738,399 | 1,137,416 | |||||
Agro-Services and Sustainable Sourcing |
23,284,411 | 570,550 | |||||
Adjustment for intersegment sales |
(7,422,748 | ) | N/A | ||||
| | | | | | | |
Total |
32,317,700 | 2,276,759 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Geographic Sales
The following table and graph provide a breakdown of our net sales by geographic markets for the the fiscal year ended November 30, 2014, 2015 and 2016:
|
For the Fiscal Year Ended November 30, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(in thousands of Pesos) |
|||||||||
Argentina |
20,342,731 | 13,040,742 | 11,797,195 | |||||||
Bolivia |
380,539 | 188,104 | 273,352 | |||||||
Brazil |
1,055,966 | 809,093 | 713,433 | |||||||
Chile |
155,402 | 422,897 | 208,130 | |||||||
Uruguay |
506,283 | 446,201 | 563,586 | |||||||
Rest of America |
320,679 | 210,305 | 545,030 | |||||||
| | | | | | | | | | |
Americas |
22,761,373 | 15,117,343 | 14,101,318 | |||||||
Other countries |
9,556,100 | 7,017,050 | 5,720,473 | |||||||
Total |
32,317,700 | 22,134,392 | 19,821,199 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
In addition to our export sales in the Americas, we sell products primarily from our Agro-Services and Sustainable Sourcing segment to buyers in various other countries outside of the region. In the fiscal year ended November 30, 2016 we had exports of 308,600 tonnes to Vietnam (which we supplied with soy flour and corn), 262,558 tonnes to China (which we supply with soybean and processed soy), 199,494 tonnes to Egypt (which we supply with flour, corn, soybeans, soy oil and soy flour), 157,175 tonnes to Spain (where we export soy flour and other products), 133,450 tonnes to Malaysia (which we supply with corn and soy oil), 123,613 tonnes to India (where we export primarily soy oil), 96,225 tonnes to Poland (which we supplied with soy flour) and 86,967 tonnes to Algeria (which we supply with corn, soy oil and soy flour) among others. For the fiscal year ended November 30, 2016, our total export sales to countries outside of the Americas was AR$9,556 million.
Total amount of export sales for the fiscal years ended November 30, 2014, 2015, and 2016 are AR$6,547 million, AR$9,094 million and AR$11,975 million, or 33%, 41%, and 37% of total net sales.
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Retail Products
Through our Retail Products segment, we offer more than 200 products through our recognized brands across a variety of categories, including flour, vegetable oil, biscuits, cookies and crackers, ready-mixed flour, bread crumbs, frozen foods and pasta. We market these products under the following recognized brands in Argentina: 9 de Oro, Pureza, Cañuelas, Mamá Cocina, Multiple, Broche de Oro, Florencia, San Agustín, Cukis and Paseo, among others, and also under more recently launched brands such as Pizza Pietro and Horno Casero. We manufacture our retail products in our own production facilities, including our recently completed Spegazzini facility, which has advanced production technology.
Our Spegazzini facility is our most recent and most significant investment aimed at expanding our product offerings in our Retail Products segment. We have invested more than US$100 million in the construction of modern continuous production lines for pre-cooked pizzas, croissants and pastries, breads and, most recently, doughnuts and muffins. We choose only the finest flour for the elaboration of our bread and pastries that are then baked and sold directly to customers. The plant is complemented with storage and distribution equipment for frozen food products. We plan to increase capacity of frozen food products line as sales of our frozen food products continue to grow.
We sell our retail products to consumers in Argentina and across the region through a variety of distribution channels, including large supermarkets (such as Walmart, Carrefour, Cencosud and DIA), wholesalers and other third-party distributors, supplemented by smaller points of sale, including gas stations (such as those owned by Shell and YPF) and convenience stores and fast food restaurants (such as McDonald's and Subway). We also produce white label versions of several of our retail
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products, including flour and vegetable oil, which we sell to key customers as an importance source of additional volume.
We have expanded the reach of our Retail Products by the introduction of new distribution formats that seek direct contact with the end customer. Through our Puntos Caliente, we provide direct technical support to points of sale that bake and offer our products directly to consumers in stands inside our distribution partners like supermarket chains. We have also recently launched our own restaurants. In Buenos Aires, we recently opened Pizza Alla Pala where we offer pizza from our own production directly to consumers. We seek to enhance our knowledge of our customers' through these direct points of sale and to continue consolidating the top-of-mind status of our Retail Products offerings.
Our frozen food products are also part of our broader list of white label products we offer to our distribution partners. By providing excellent product quality for their private labels, we became strategic partners with large supermarket and retail chains and improved our knowledge of consumer tastes. This knowledge has allowed us to later develop our own retail products for the flour, vegetable oils, biscuits, cookies and crackers, ready-mixed, bread crumbs, frozen foods and pasta product categories. In many cases, our knowledge of retailers and consumers allowed us to pioneer ahead of our competitors.
We believe that our retail products are geared towards offering solutions to consumers through both improved quality and product innovation. Our innovations include self-rising flour with natural yeast, moisture resistant packaging for flour, spill-proof pour spouts for vegetable oil, and other products designed to provide ready-made solutions for our consumers.
The breadth and scale of our retail product offerings has allowed us to achieve low distribution costs along with strategic importance to the largest retail distributors and supermarket chains in the markets in which we operate. Over time, as sales of our retail products continue to grow, we expect to benefit from our strengthened relationships with retailers and our low distribution costs to be able to more swiftly and more efficiently launch new products and new product categories.
For the fiscal year ended November 30, 2016, our Retail Products segment generated AR$3,718 million in net sales, or 12% of our total net sales, and AR$569 million of Adjusted Segment EBITDA, or 25% of our Total Adjusted Segment EBITDA. For the fiscal years ended November 30, 2014 and 2015, our Retail Products segment generated AR$2,393 million and AR$2,461 million of net sales, respectively, or 12% and 11%, respectively, of our total net sales and AR$313 million and AR$220 million of Adjusted Segment EBITDA, respectively, or 35% and 20%, respectively, of our Total Adjusted Segment EBITDA.
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According to the Nielsen Reports and CCR Reports, for the fiscal year ended November 30, 2016, our Retail Products segment had market shares of 26.0% (vegetable oils), 41.7% (flour), 34.1% (biscuits sub-category), 27.0% (ready-mixed products) and 25.5% (bread crumbs), respectively.
Retail Product Market Opportunities
New trends in consumption, the expanding role of women in modern life and the trend toward healthier eating habits, are among the challenges that we face as a company. We believe that our market and consumer understanding will give us the opportunity to fulfill the needs of consumers with our extensive portfolio. We seek to develop products that become solutions for, and partners in the kitchen with, today's women. We believe we offer the modern woman numerous solutions to feeding her family, combining homemade qualities, nutritious options, practicability and healthfulness, while also allowing home cooks to add their own personal touches. We recognize that these home cooks are not only moms, but also wives, co-workers and friends, who enjoy nourishing their family and enjoy
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free time for themselves, as well. It is for these women that we target many of our branded retail food products.
Regional(1) Packaged Food Sales ('000 Tonnes) | Argentina Packaged Food Sales ('000 Tonnes) | |
Source: Euromonitor, IMF and INDEC | Source: Euromonitor, IMF and INDEC | |
(1) Includes Argentina, Bolivia, Brazil, Chile and Uruguay |
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Regional(1) Convenience Food Sales (mm kg) | Argentina Convenience Food Sales (mm kg) | |
Source: Euromonitor, IMF and INDEC | Source: Canadean | |
(1) Includes Argentina, Bolivia, Brazil, Chile and Uruguay |
For further information on the CAGR amounts presented above, please see "IndustryIndustry OverviewPackaged Food Industry" and "Prepared Meals Market Trends".
Business Lines for Our Retail Products Segment
The following table provides our market share, according to the Nielsen Reports or CCR Reports where indicated, for each of the business lines in our Retail Products segment:
Retail Products Business Lines |
Brand(s) | Market Share(1) |
Main Competitors | Net Sales for the Fiscal Year Ended November 30, 2016 (in thousands of Pesos) |
Percentage of Net Sales of the Retails Products Segment for the Fiscal Year Ended November 30, 2016 |
Percentage Increase (decrease) in Net Sales for the Fiscal Year Ended November 30, 2016 from November 30, 2015 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Vegetable Oils(a) |
|
26.0 | % | Aceitera General Deheza; Molinos Río de la Plata S.A. | 1,364,457 | 36.7 | % | 65.9 | % | |||||||||
Flour(b) |
41.7 | % | Molinos Río de la Plata S.A. | 1,239,125 | 33.3 | % | 41.4 | % | ||||||||||
Biscuits, Cookies and Crackers(c) |
34.1% | (g) | Bagley; Arcor-Danone; Mondelez | 685,578 | 18.4 | % | 48.5 | % | ||||||||||
Ready-Mixed Products(d) |
27.0 | % | Molinos Río de la Plata S.A. | 53,224 | 1.4 | % | (5.2 | %) | ||||||||||
Bread Crumbs(e) |
25.5 | % | Molinos Río de la Plata S.A. | 121,207 | 3.3 | % | 31.6 | % | ||||||||||
Frozen Food Products |
|
N/A | (h) | Fargo; Pan Bimbo; Cremachel; and McCain Foods | 160,457 | 4.3 | % | 635.7 | % | |||||||||
Pasta |
N/A | (f) | Molinos Río de la Plata S.A. | 78,252 | 2.1 | % | (13.8 | %) | ||||||||||
Other Products |
N/A | N/A | 15,338 | 0.4 | % | (61 | %) | |||||||||||
Total Retail Products segment |
3,717,638 |
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Flour
We offer a wide variety of consumer flours made from carefully selected wheat with specialized industrial treatments that result in high-quality products that are suitable for a variety of uses and consumer tastes. Our portfolio is composed of fortified refined flour, fortified ultra-refined flour, whole grain flour, self-rising flour and self-rising flours containing natural yeast (for bread or pizza making). In addition, we also sell flour-based retail products in larger packaging sizes to retailers in our food services channel.
According to the 2016 Nielsen Flour Report, for the fiscal years ended November 30, 2014, 2015 and 2016, our flour business line had a 45.6%, 44.7% and 41.7% market share in Argentina, respectively.
In Argentina, flour is graded by health standards as grade 0000, grade 000, grade 00, grade 0 or grade 1/2, which range from the maximum to the minimum range under regulation. Only grade 0000, 000 and self-rising flour (with natural or chemical leavens) are sold directly to consumers.
As part of our commitment to product differentiation and innovation, we were the first producer in South America to offer self-rising flour utilizing 100% natural yeast and currently have over ten years of market presence. Our natural yeast-based self-rising flour took over two years to develop and required both innovation in yeast culture and in temperature resistant packaging. This innovative, convenient and solution-oriented product is an example of our production philosophy. In addition, we believe that our use of all natural yeast instead of chemical leavens contributes to our Pureza brand's image as wholesome and natural.
Sales and Marketing
We sell our flour products under the Pureza, Cañuelas, Florencia and San Agustín brands, which are currently offered in the market standard 1 kg packaging presentation.
Our Pureza brand is a leading top-of-mind brand in different flour types. It is produced from a conventional milling process and later fortified with vitamins, iron, calcium and folic acid. Following our strategy of product differentiation, Pureza is a leading brand, according to the 2016 Nielsen Flour Report, through which we pioneered the production and sale of fortified flour in Argentina and provides an innovative moisture resistant and user-friendly packaging. We have further differentiated this product by including specialized all natural self-rising flour for both pizza and bread.
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Our Pureza brand products are made from carefully selected wheat, which is filtered through additional sieves to ensure less clumping than flour prepared through a conventional milling process. We believe that processes like this one allow us to produce value-added products.
In the fortified flours sub-category, we are active in the refined, ultra-refined and whole wheat product categories. According to the 2016 Nielsen Flour Report, our Cañuelas brand is the market leader in Argentina in the 000 wheat flour category.
Our Florencia flour brand is a regional brand in Argentina, popular in the province of Córdoba and other nearby regions outside the Greater Buenos Aires region. The brand has a historical presence in these areas and is preferred by local consumers.
Our San Agustín flour brand is our value brand and provides a competitive quality offering.
Competition and Market Position
As pricing in the flour market is very competitive, consumer choices are based on brand recognition, perceived quality and other attributes. Our primary competitor in our flour business line is Molinos Río de la Plata S.A., which presents many similar product offerings in some of the product categories in which we are present, but not all. The flour market in Argentina is typically subdivided into the following four product categories: grade 000 flour, grade 0000 flour, self-rising and special-purpose flours.
According to the 2016 Nielsen Flour Report, we are the leading producer and marketer of direct-to-consumer flour in Argentina. For the fiscal year ended November 30, 2016, our flour business line had an overall market share of 41.7%.
White Label
We produce white label flour products for strategically selected customers in order to meet our production and volume goals and create value for our Retail Products segment by allowing us to build strong ties with retailers and improve our own products by meeting their quality standards. Our white label production is also an important tool for learning consumer tastes prior to new product launches under our own brands. Our white label output is not accounted for in our market share measurements. We currently produce white label flour products in Argentina for the Carrefour, DIA, Great Value (a Walmart brand), Maroleo (Maxiconsumo wholesale) and Coto brands and other private labels for large supermarket chains in Uruguay, such as Tienda Inglesa and Tata.
Vegetable Oil
We offer a broad array of vegetable oils to consumers in varying sizes and formats that are designed to meet consumer needs. According to the 2016 CCR Vegetable Oil Report, our vegetable oil business line had a 26.0%, 25.7% and 26.0% market share in Argentina for the fiscal years ended November 30, 2014, 2015 and 2016, respectively.
Sales and Marketing
Our vegetable oil offerings encompass sunflower oil, high oleic sunflower oil, corn oil, high oleic sunflower oil blend with extra virgin olive oil and a soy oil blend, and extra virgin olive oil featuring soft, classic and intense flavor versions in order to satisfy different consumer tastes. We offer different package sizes ranging from 0.5 to 1.5 liters. We also offer a variety of vegetable oils in special sizes for the food service and restaurant sales channels. Our olive oil is purchased in bulk from third-party manufacturers and all of our other vegetable oils are distilled by us.
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According to the 2016 CCR Vegetable Oil Report, our Cañuelas brand has the third highest market share in vegetable oil in Argentina, with a 19.9% market share and offers innovative packaging with a pouring spout and an ergonomic bottle. We market our vegetable oil products under the Cañuelas, Broche de Oro and San Agustín brands, with our San Agustín brand representing a value for money proposition to our customers. Our Broche de Oro brand is specially designed for our food service channels, as described in "Business Lines for our Retail Products SegmentFood Service Frozen Food Products".
We consider differentiation through product innovation to be a key part of our strategy when launching new products. Our vegetable oil containers benefit from ergonomic design, are made from stronger PET material than our competitors and have a registered proprietary dosage controller nozzle to help our consumers economize on use and avoid spilling.
As part of our commitment to developing our product portfolio, we have developed our high oleic sunflower oil products. This product was developed in part by promoting the increased cultivation of high oleic sunflower seeds by a select group of our most loyal farmers. After a testing period, such farmers cultivated these high oleic sunflower seeds and sold them to us for processing at our oil manufacturing plants. Our high-oleic sunflower oil provides consumers with an opportunity to prepare healthy and natural dishes. We offer high oleic sunflower oil in 1, 1.5 and 5-liter containers. For a further description of our efforts to encourage production of specific agricultural product inputs, see "BusinessBusiness SegmentsAgro-Services and Sustainable SourcingSustainable Sourcing".
Competition and Market Position
According to the 2016 CCR Vegetable Oil Report our primary competitors in the vegetable oil business line are Aceitera General Deheza, and Molinos Río de la Plata, which together hold over 50% of the market share. The total size of the vegetable oil market in Argentina is 145,967 tonnes according to the 2016 CCR Vegetable Oil Report. Our two primary competitors present similar product offerings in all of our product categories. According to the 2016 CCR Vegetable Oil Report, our market share for vegetable oil is 26.0% for the year ended November 30, 2016.
White Label
As we do with certain of our other retail products, we also produce white label vegetable oil products for strategically selected customers. Our white label production is also an important tool for learning consumer tastes prior to new product launches under our own brands. Our white label output is not accounted for in our market share measurements. We currently produce white label vegetable oil products in Argentina for the Carrefour, DIA, Great Value (a Walmart brand), Maroleo (Maxiconsumo wholesale) and Coto brands and for other private labels of large supermarket chains in Uruguay, such as Tienda Inglesa and Tata.
Biscuits, Cookies and Crackers
We produce biscuits, cookies and crackers through our established brands: 9 de Oro, Paseo and Cukis.
Our biscuits products include classic, bittersweet, bran, light, sugary mini scones and our recently launched gluten-free rice biscuits. Our products are sold in the 200g and 210g packaging and light biscuits in 170g packaging. Our new rice biscuits are also sold in 100g and 50g packaging.
Our crackers are primarily made from our ultra-refined flour and vegetable oil and contain no trans-fats. We offer several cracker varieties in Mini Crackers, Mini Crackers Bran, Mini Crackers 5 Seeds and Mini Crackers Sesame. Our products are sold in packaging sizes of 300g and 150g. We also produce sweet cookies with different jam fillings and a lighter and softer dough.
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According to the 2016 CCR Biscuit Report, our biscuits products had a 34.8%, 37.5% and 34.1% market share in Argentina, respectively, for the years ended November 30, 2014, 2015 and 2016.
Sales and Marketing
We sell our biscuits, crackers and cookie products under the 9 de Oro, Paseo and Cukis brands. Our 9 de Oro brand is our oldest and most well-known brand and is a top-of-mind brand in the biscuits, cookies and crackers business line. According to the 2016 CCR Biscuit Report, our 9 de Oro products are viewed by consumers as a high-quality, value-added products derived from baked goods with artisanal characteristics. Our marketing of this brand has historically been associated with sporting events, such as car-racing and soccer. Based on our analysis of market share figures provided by 2016 CCR Biscuit Report, our 9 de Oro brand is benefiting from the broader growth trend in the cookies, crackers and biscuits product categories.
Our Paseo brand is associated with healthy, light snacks. Its products are characterized by smaller portions and have an innovative bag-style presentation designed for consumption by multiple people, a feature that differentiates the brand, which has grown its sales volume from 73,456 tonnes to 75,608 tonnes from the fiscal year ended November 30, 2015 to the fiscal year ended November 30, 2016. The latest growth in sales volume of our brand Paseo has been driven by the addition of new products with added value (such as our Semillas (seeds) and Sin Sal (no salt) lines and other lines which use a mixture of cereals) and a product reformulation designed to improve the brand's health value (for example through the replacement of animal fats with high oleic oil from plant origin and the removal of trans fats).
Our Cukis brand, is a competing option in the market for sweet cookies. The products offer a combination of natural fruit jams and a light, soft and lighter dough, a type of cookie that is known in Argentina as pepas. Our Cukis brand was the first to offer a mixed variety of jam flavors, such as quince, raspberry, cranberry and passion fruit.
Competition and Market Position
The biscuits, cookies and crackers business line represents a total market size in Argentina of 527,000 tonnes per year. According to INDEC, for 2016 the estimated population in Argentina is 43,590,000, which corresponds to a consumption rate of biscuits, cookies and crackers of approximately 12.09 kg per capita.
We believe that Molino Cañuelas is one of the key players in the biscuits product category. This product category is our most significant source of sales and revenue in our biscuits, cookies and crackers business line. According to the 2016 CCR Biscuit Report, for the fiscal year ended November 30, 2016, the biscuits product category in Argentina were led by Bagley, Arcor-Danone and Mondelez, which together had over 30% of aggregate market share in the biscuits categories. We do not currently have aggregate market shares for the entire biscuits, cookies and crackers business line as it is. Our market share in other subcategories of biscuits, cookies and crackers is not significant due to our smaller position and more recent product launches.
Ready-mixed Products
We offer a wide range of ready-mixed products including special flour blends for pizza, gnocchi, chipa (cheesy bread), spinach croquettes and crepes.
According to the 2016 Nielsen Ready-Mixed Products Report, our ready-mixed products business line had a 35.5%, 33.1% and 27.0% market share, respectively, for the fiscal years ended November 30, 2014, 2015 and 2016.
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Sales and Marketing
We sell our ready-mixed products under the Pureza and Mamá Cocina brands.
Our Pureza brand offers dry mixes with natural yeast in both a classic and whole wheat formulations, the latter of which is a unique product exclusive to our Pureza brand. We believe it offers a delicious way of incorporating fiber into dishes that can be enjoyed by the whole family. Our product is designed to allow consumers to cook naturally rising homemade pizzas in as little as ten minutes. Each package contains enough for three pizzas.
Our Mamá Cocina brand offers nutritious, practical, healthy and homemade solutions to modern home cooks and consumers, allowing them to produce home-cooked meals with a personal touch. Our Mamá Cocina ready-mixed product portfolio includes potato gnocchi, spinach gnocchi, pumpkin gnocchi, pizza (with added baking powder), chipa (a kind of cheese bread) and sweet vanilla and apple crepes.
Competition and Market Share
We believe we are one of the key players in the ready-mixed products market. According to the 2016 Nielsen Ready-Mixed Products Report, for the fiscal year ended November 30, 2016, our market share in Argentina in the ready-mix product category was 27.0%. According to the 2016 Nielsen Ready-Mixed Products Report, for the fiscal year ended November 30, 2016, our primary competitor was Molinos Río de la Plata S.A. Most of our growth in this business line has been based on the introduction of new products. Our ready-mixed products, like our other flour-based products, are priced at a premium and are typically higher in price than the average price of products in the ready-mix category. Our products are designed to appeal to younger consumers who have changing habits and are shifting away from more traditional products that require greater preparation time.
Bread Crumbs
We sell bread crumbs to consumers in varying sizes and formats that are designed to meet different needs. Our product offerings include traditional bread crumbs, bread crumbs for frying and bread crumbs for baking in 500g and 1kg packaging. According to the 2016 Nielsen Bread Crumb Report, our bread crumbs business line had a 29.6%, 27.7%, and 25.5%, market share in Argentina, respectively, for the fiscal years ended November 30, 2014, 2015 and 2016.
Sales and Marketing
Our bread crumb products cover three major categories, traditional breadcrumbs, bread crumbs optimized for frying and bread crumbs optimized for baking. We believe our bread crumb products have significant health value as a result of their richness in bran, oatmeal and wheat germ. In addition, our products follow World Health Organization standards. As a consequence, these products are low in sodium and fortified with iron and zinc and enriched with bran, oatmeal and wheat which provide a healthy option in the bread crumb market in Argentina.
Our products are sold under the Mamá Cocina brand and are positioned as both convenient, solution-oriented products with a nutritional component.
Competition and Market Position
The bread crumb market in Argentina is sub-divided into three categories: traditional breadcrumbs, which represent 63% of total sales volume, bread crumbs for frying which represents 28% of total sales volume and bread crumbs for baking which represents 7.8% of total sales volume, in each case, according to the 2016 Nielsen Bread Crumb Report. According to the 2016 Nielsen Bread Crumb Report, we are the second largest player in the bread crumb market in Argentina with a 25.5% market
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share for the fiscal year ended November 30, 2016. Our primary competitor is Molinos Río de la Plata S.A., with over 50% of total market share in Argentina according to the 2016 Nielsen Bread Crumb Report.
Frozen Food Products
Since 2015 we have been producing frozen and partially cooked bakery products in an effort to offer consumers a value-added, ready-to-eat product made using high-quality ingredients.
We began our frozen food product operations at our Spegazzini facility, Argentina in 2015. This modern and technologically advanced facility has a production capacity of approximately 20,000 tonnes of frozen food products per year, including bread, croissants, facturas (pastries), pizzas and other products. Our production facility complies with the FSSC 22000 food safety framework.
We divide our frozen food products business line into two categories: frozen food service products and frozen food retail products.
Frozen Food Service Products
Through our frozen food service product channel, we sell frozen food service products to supermarkets chains, distributors, wholesalers, gas stations, fast food and other convenience stores and retailers who later re-sell or use these products in their food preparation activities. The various baked goods sold under the food service channel are branded under Molino Cañuelas name. By advertising our products as being made with Pureza flour, we seek to provide a guarantee to our customers that these products represent the high quality in ready-to-eat food.
Sales and Marketing
Our frozen food service product portfolio consists of:
We have also developed specialized products for certain important customers in order to meet their requirements and specifications. These include products like Kaiser bread and cinnamon rolls for McDonald's, the development of a special croissant and special Kaiser bread for the preparation of a rustic hamburger for YPF and Shell, the preparation of an exclusive rustic bread line for Jumbo, the preparation of an innovative pastry line for DIA and a new sandwich bread for large frozen bread distributors. We believe that our broad range of product offerings and ability to prepare specialized offerings for our customers provides us with a competitive advantage against our competitors.
In addition to our existing products, we are currently developing a line of doughnuts, jelly-filled doughnuts, muffins, puddings and brownies that will be ready-made and sold across our various frozen product points of sale. We will continue to consolidate our presence in this business with these
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launches by offering a wider assortment of products. For more information on this initiative, see "New Projects and InvestmentsRetail and Food Services Expansion".
Frozen Food Retail Products
We offer the unique and exclusive line of frozen breads under our Mamá Cocina brand. Our frozen food product offerings under the Mamá Cocina brand include six different varieties of pre-baked breads which are sold frozen and can be prepared in 15 minutes using a conventional home oven. Consistent with the Mamá Cocina brand, the products aim to be on practical and healthy options for the home cook. Our frozen food products preserve their fresh quality and retain the smell of fresh baked breads.
In order to broaden our offering of frozen food retail products, we plan to launch two brands of frozen pizza oriented to different market segments: Pizza Pietro( ) and Horno Casero( ). Pizza Pietro will be a premium brand made with high quality ingredients to fulfill consumer tastes for upscale flavor. The key product under our Pizza Pietro brand will be our traditional brick-oven style mozzarella pizza. We will also offer two pizza breads under this brand as well as thick crust mozzarella, mozzarella and ham, pepperoni (Calabrian style) and double mozzarella pizzas.
In contrast, Horno Casero will be our value-for-money pizza brand, oriented to those consumers who want both convenience and the right price. It will be a quality pizza that is conveniently packed and will be distributed in non-traditional sales channels. Mozzarella cheese will be the sole flavor option under this brand. The Horno Casero brand will include cheese bread (chipa) and four varieties of empanadas.
Sales and Marketing
Our products include small buns in four styles: small baguettes, pancitos de manteca (butter buns) and rosetas (rose style bread). All of our products are sold in innovative packaging that is moisture resistant and suitable for freezing. The frozen bread line is made with Pureza flour and is advertised as such. The product line is marketed on the basis of its healthiness and ease of use, while offering consumers a means of preparing fresh bread and enjoying the accompanying freshly-made smell. Mamá Cocina frozen food products are positioned as a means of allowing consumers to conveniently produce fresh products despite their busy lifestyles.
We intend to expand our line of direct to consumer frozen foods, which we consider to be an expanding market in Argentina, with sales and marketing as key components for our strategy.
Pizza Pietro will be positioned as premium brand in direct competition against the market leader. In order to position this brand for success in our target market, we are designing a product that pleases the consumers with the basic characteristics of high-quality pizza: crispiness, the right amount of tomato sauce and a lot of cheese. Pizza Pietro will be distributed in major supermarket chains with extensive brand support via brand signage and consumer product samples. Further, we also plan to support commercial price deals to consumers to promote product trials.
Alternatively, the rationale of Horno Casero is to reach our potential customers in places where frozen pizzas are harder to find, such as convenience stores, ice cream chains, fresh poultry stores (granjas), among others locations. The product is oriented to those housewives who want to solve a daily meal with something that the entire family can enjoy at an affordable price.
Competition and Market Position
The primary competitors of our different frozen food products are Bimbo (which recently acquired General Mills' Argentine operations for frozen bread), Cremachel (pastry), McCain (pizza) and several
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smaller competitors. All of competitors specialize in certain product niches. We are different from these competitors in that we offer the most varied array of products in the frozen food retail products business line in Argentina, with over 100 SKUs, including specially made offerings for our commercial food service customers such as McDonald's, YPF and Shell, which allows us to be considered as a strategic and reliable provider of solutions for multiple frozen food products. Due to the recent launch of our frozen food products business line, we currently have limited market share information available.
Pasta
We also make and sell dry pasta using candial or durum wheat.
Sales and Marketing
We sell our pasta products under the San Agustín brand in a 500g packaging. Our San Agustín brand is a value brand which provides a wide range of pastas. In Argentina, our pasta products are made in varieties that are popular in Argentina, including spaghetti, noodle soup, dedalito soup, ave maria noodle soup, angel hair soup, nido angosto, nido ancho, municiones soup, rigatti, mostachole, coditos, celentano and gnocchi.
Consistent with one of our main business strategies and core commitment of providing solutions through innovation, we are working on a project with leading technology to elaborate instant pasta to consume on the go. As of the date of this prospectus, no other company in South America is currently selling pasta products that use this technology.
Competition and Market Position
According to Euromonitor per capita consumption of pasta in the Argentine market was 7.9 kg per capita/year in 2016. The market is divided into dry pasta (including stuffed, dry, egg, durum and a durum wheat mix) and fresh pasta (loose fresh and fresh packaged). In recent years, consumers have developed a greater preference for higher quality noodles, especially for dry noodles made with durum wheat. We currently do not produce fresh pasta.
According to the 2016 Nielsen Pasta Report, the market leader in Argentine pasta products is Molinos Río de la Plata S.A. The Argentine pasta market is characterized by several major established players with significant experience and strong market position. We are not among this list of established players and consider our market share to be insignificant due to our more recent entry into the pasta market in Argentina.
High Quality and Low Cost Sourcing as a Competitive Advantage
We believe the success of our Retail Products segment is, to a large extent, the result of our careful selection of high quality agricultural products through our Agro-Services and Sustainable Sourcing segment. The control of our own manufacturing process through our Branded Industrial Products segment also gives us a competitive advantage in the supply of the highest quality flour for our dry-goods and frozen food products lines. Through the achieved scale, we are able to have highly efficient production and distribution processes that allow us to affordably test new products and achieve profitability in new product launches much faster than is the case for many of our competitors
Regional Production
In Uruguay, we have developed an extensive and sophisticated retail product presence, which makes an important contribution to the net sales of our Retail Products segment. We are present in 100% of national and international supermarket chains in Uruguay, which include Grupo Casino, Supermercados TaTa, Ta!, Multiahorro, Multiahorro Express, and Super Mercados Tienda Inglesa.
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As part of our strategy of replicating the success of our business model in Argentina and Uruguay, we are also planning to gradually expand our operations in Brazil with the introduction of Retail Products. We have developed new products that are customized to Brazilian tastes based on our experience with over 1,000 Brazilian branded industrial product customers. We intend to distribute these products, including flour and certain ready-mixed products, through our distribution centers located in São Paulo, Rio de Janeiro and Pernambuco. These new products, with their distinctive labeling, include fortified ultra-refined flour, self-rising flour and self-rising flours containing natural yeast (for making pizza) under Pureza brand and also ready-mixed products as potato gnocchi and panqueca (a special crepe for the Brazilian market) under the Cozinha da Mamae brand (a translation of Mamá Cocina). We intend to use our increased installed capacity as a result of the Cargill Acquisition to supply our increased production of retail products for the Brazilian market.
In Bolivia, we sell most of our varieties of retail flour for consumer use as well as branded industrial flour for industrial use, including, in the case of branded industrial flour, to Nestlé, where we have established a prominent market position.
In Chile, we have been offering our flour and oil white label products to several local producers since 2013, including Walmart.
We plan to continue to leverage on the presence of our regional customers in these markets, including McDonald's, Walmart, Carrefour, Cencosud and DIA, to support our expansion efforts. We use the Las Palmas port to export many of these retail products and plan to increase our port operations in line with our planned increase in regional sales.
Distribution
Our products in our Retail Products segment are sold to supermarket chains, wholesalers, distributors and through our food service channels.
We have an efficient and centralized distribution channel that is closely aligned with the geographical position of our production facilities, which allows us to optimize our supply and reduces costs. We believe that this dense distribution network provides a competitive advantage for our retail product operations.
We currently have two retail product sales teams. The dry goods team is dedicated to our well-established dry goods business which includes our vegetable oil, flour, biscuits, crackers and cookies, ready-mixed products, bread crumbs and pasta. The Frozen Food team is dedicated to our newer frozen food products businesses which include the sale of our frozen French bread, baguettes, pastries and other products.
The dry goods team is tasked with the development of new business opportunities and product launches for our dry goods. The frozen food team is tasked with ramping up our new frozen food products business. As a result of this, their role is more technical and involves ensuring product quality at the actual point of sale. Unlike the dry goods team, the frozen food team view the final delivery of the finished baked product to the end consumer as the final sale. Together, both teams offer comprehensive solutions for our different types of customers. Through this process, we seek to offer an integrated product and service to supermarkets, gas stations, fast food stations and other customers in order to ensure that the end consumer enjoys a product that retains all of the qualities of freshly baked bread.
In addition to our distribution and sales operation, we have a trade-marketing team that offers a product replacement service at key stores using third-party trade marketers, thereby ensuring proper shelf displays and maximizing sales. For the fiscal year ended November 30, 2016, sales to supermarket chains represented 36% of total volume sold of our non-frozen retail products.
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We are present in, and directly sell to, virtually all of the national and international supermarket chains in Argentina, including, among others: Cencosud, DIA, Walmart, Carrefour, Coto, La Anónima, Cooperativa Obrera, Toledo and Libertad. We also make direct sales to key gas station convenience stores such as those owned by Shell and YPF in addition to fast food restaurants such as McDonald's, Burger King, Mostaza and others.
In addition, our product categories provide special formats for the food service industry ranging in size from five to 50 kilograms for larger flour-based products and five liters for vegetable oils.
In addition to our sales to retailers, we supply major wholesalers and distributors through our intermediate channel. These parties thereafter resell directly to smaller retail operations, thereby bringing our products closer to smaller retailers and enhancing our distribution network. We work with virtually all major food wholesalers in Argentina. For the fiscal year ended November 30, 2016, sales to wholesalers represented 27% of total volume sold of our non-frozen retail products.
In addition to wholesalers, we market our products through key distributors located in different parts of Argentina. Our distributors are strategically located in the most populated areas of the country. The goal in choosing our distributors is to maximize physical distribution and product mix. For the fiscal year ended November 30, 2016, sales to distributors represented 37% of total volume sold of our non-frozen retail products.
Direct to Consumer Points of Sale (Puntos Caliente and Pizza Alla Pala)
We also distribute and sell our frozen food retail products through points of sale where retailers bake our frozen bread and pastries and sell them directly to consumer inside their stores (these retailers include supermarkets, gas stations, wholesale stores, among others). We refer to this points of sale as Puntos Caliente and we currently operate hundreds of them in Argentina and are expanding to include more, primarily in major supermarket chains, gas stations and fast food channels. We believe that these spots are a valuable service to supermarkets, gas stations, fast food retailers and other retailers who seek to offer their customers the prospect of freshly baked bread and other food products.
Our level of involvement in these Puntos Caliente not only allows us to participate in the provision of our product portfolio but also permits us to partner with retailers and provide them with our technical advisory services. The management of these in-store bakeries benefits from the technical and advisory support of our sales team and use our Pureza brand. We offer advice on planning their layout, managing their operation preparing the ideal assortment of products, participating in product promotions, organizing product display and participating in the development of marketing materials and training of personnel. We also provide the correspondent ovens through a lease. The oven lease is priced at the cost of amortization plus a monthly maintenance fee. These fees are priced against the revenue generated by the oven and we use this information to determine the success of each of our Puntos Caliente.
The ovens are digital and programmed by us in order to ensure optimum quality of the end product and our customer's experience. As part of our Puntos Caliente services, we have a team of specialists who provide technical assistance to use our ovens. Currently we have over 730 ovens operating at our Puntos Caliente points of sale. We believe that our Puntos Caliente points of sale help us further develop our brand of frozen foods by associating our brands with ready-made products.
Similarly, we have recently opened a new pizza restaurant in Buenos Aires under the brand Pizza Alla Pala. Consistent with our strategy with Puntos Caliente, we will seek to develop our frozen food brands by focusing on high product quality and ensuring direct access to consumers.
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Branded Industrial Products
The main focus of our Branded Industrial Products segment is to supply inputs to our Retail Products segment, as well as to third-party branded industrial product customers. We sell flour, ready-mixed flour and additives through our Cañuelas, Florencia, Multi, Adelia María, Favorita, Leticia, Terminada, Rosafe, San Agustín and Pigüé brands. We manufacture our branded industrial products in our 21 production facilities in the region as well as two third-party production plants in Argentina. According to FAIM, during 2016, we processed over 28.5% of the total volume of wheat processed in Argentina, making us the largest wheat flour producer in the country.
Following the Cargill Acquisition, we now possess an installed milling capacity of approximately 3.13 million tonnes per year, according to MAGyP. In addition, according to Euromonitor, we are the largest exporter of flour in Argentina by volume, exporting 233,813 tonnes during 2016, representing 57.9% of the total flour exported in Argentina during 2016. In Argentina, our main third-party customers in this segment include Molinos Río de la Plata, Arcor, Mondelez, Bimbo and General Mills. Our Branded Industrial Products segment also includes our packaging production operation through the packaging business acquired from Cañuelas Pack S.A., which we use to differentiate our products through innovative and technologically advanced packaging.
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The following chart shows the evolution of our installed milling production capacity:
Installed Milling Capacity
For the fiscal year ended November 30, 2016, our Branded Industrial Products segment generated AR$12,738 million (US$803 million) in net sales, of which AR$11,281 million, or 35% of our total net sales, consisted of net sales to third parties, and AR$1,137 million (US$72 million) in Adjusted Segment EBITDA, or 50% of our Total Adjusted Segment EBITDA. For the fiscal years ended November 30, 2014 and 2015, our Branded Industrial Products segment generated AR$10,850 million and AR$7,652 million, respectively, of net sales, of which AR$6,729 million and AR$10,034 million, respectively, or 34% and 45% of our total net sales, respectively, consisted of net sales to third parties and AR$354 million and AR$338 million of Adjusted Segment EBITDA, respectively, or 40% and 30% of our Total Adjusted Segment EBITDA, respectively.
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The main inputs for our products consist primarily of different types of wheat flour, corn and soybeans. Our integrated production chain provides conditions for better production planning, better product quality, better production efficiency, more competitive prices and better control of production costs. The milled wheat flour we produce under Cañuelas and other brands is purchased by bakeries and other commercial retailers, including Cencosud, Walmart, Carrefour and others. The animal feed products we produce are sold to farms and other resellers.
The following map shows the locations of our production facilities, distribution centers and commercial offices for our branded industrial products:
Business Lines
We produce flour through our 16 industrial mills across the region, as well as two third-party production plants in Argentina. The following table provides a historical overview of the growth of each of the business lines in our Branded Industrial Products segment over the last three fiscal years by business line:
|
For the Fiscal Year Ended November 30, |
||||||
---|---|---|---|---|---|---|---|
|
Net Sales | Percentage of Branded Industrial Products Segment Net Sales |
|||||
|
2016 | ||||||
|
(thousands of Pesos) |
% |
|||||
Flour |
4,311,624 | 50.2 | % | ||||
Animal Feed |
17,670 | 0.2 | % | ||||
Processed Soybean |
6,767,760 | 47.4 | % | ||||
Packaging |
184,495 | 2.2 | % |
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Flour
We produce flour for bakeries and other commercial producers of baked goods. We were the first Argentine mill to develop industrial ready-mixed flour for the production of French bread and other value-added products, such as pizzas. For the fiscal year ended November 30, 2016, our branded flour business line produced 1,279 thousand tonnes of flour. For the fiscal years ended November 30, 2015 and 2014, we produced 782 thousand and 789 thousand tonnes of flour, respectively.
The flour we produce at the 16 industrial mills used in our Branded Industrial Products segment in Argentina includes industrial scale refined flour as well as whitened flour.
We sell the following types of flour under our Cañuelas brand:
Flour
|
Bag Sizes | Use | ||
---|---|---|---|---|
Grade 000 |
5kg, 25kg and 50kg |
Production of French bread and other types of bread, pastries and cookies |
||
Grade 0000 |
5kg, 25kg and 50kg |
Production of pasta, sandwich bread, figazzas, fine pastries, pizza, cakes, alfajores, churros and doughnuts |
||
Grade 00 (Real) |
50kg |
Production of empanadas, cakes and pasta |
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Flour
|
Bag Sizes | Use | ||
---|---|---|---|---|
Semolina |
25kg and 50kg |
Production of pasta and gnocchi |
||
Whole-Wheat |
25kg |
Production of whole wheat cookies and bread |
In addition, we also sell specialized ready mixed flour for our customers utilizing the MultiHarina brand:
Flour
|
Bag Sizes | Use | ||
---|---|---|---|---|
Pizza |
25kg |
Pizza or the production of arab fugaza, grisines, marineras and
flavored bread |
||
Bran Bread |
25kg |
Production of trenzas, espigas, chips, croissants, pizza and cookies |
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Flour
|
Bag Sizes | Use | ||
---|---|---|---|---|
Milk Bread |
25kg |
Production of milk-based bread commonly consumed in Argentine households |
||
Sweet Bread |
25kg |
Production of traditional, milanese, genovese, panettone, roscas and other traditional sweet bread |
||
Vienna-style bread |
25kg |
Production of pebetes, burger bread, espigas, berlinesas |
||
Sandwich Bread |
25kg |
Production of different types of bread, cookies and grisines |
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Flour
|
Bag Sizes | Use | ||
---|---|---|---|---|
Gnocchi |
25kg |
Production of the different varieties of gnocchi |
||
Facturisima & Factugras |
25kg |
Production of pastries (both animal fat and butter fat based varieties) |
||
Budin |
25kg |
Production of different types of sweet biscuits and cakes such as magdalenas, polvoronesi, pastrafrola, among others |
In addition to our branded industrial flour products, we also sell specialized industrial flours with an ISO 9001 certification in 25kg and 50kg bags. These flours include flour for fresh pasta, French bread made using slow and fast fermentation and sandwich bread.
We are the principal supplier of several market leading producers of pasta, bread and other wheat based branded industrial products in Argentina, including Arcor, Mondelez and Molinos Río de la Plata.
Flour presentations vary from big bag (1 tonne), bakery size (50kg), and small sizes (25kg). Shipments are made by trucks rented from third parties.
In addition to our production in Argentina, we also have milling operations in Brazil and Uruguay. Our flour is processed in our plant located in Salvador, Bahia and offered in 25kg and 50kg packaging.
Customers
The production from our Branded Industrial Products segment is sold primarily to third-party customers which include bakeries and other commercial or industrial producers of baked goods in Argentina and is also exported outside Argentina. A number of the branded industrial products
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customers we supply in Argentina are also some of the primary direct competitors of our Branded Industrial Products and Retail Products segments. The majority of our over 3,000 customers consist of smaller bakeries and producers. For the year ended November 30, 2016, none of our third-party branded industrial products customers represented more than 5% of our net sales for the Branded Industrial Products segment.
We supply other major food producers such as Arcor, Mondelez, and Molino Río de la Plata in Argentina. Our main customers in Uruguay are Geant, Ta-Ta, Multiahorro, Punta Ballenas, Pangiorno, Molino Puritas, Las Acacias, Pastas Giuliana, Amsterdam, Bimbo, Macro Mercado, El Trigal, McDonald's, Grupo Casino, Tienda Inglesa and Pagnifique. In Brazil, our main customers are Fabise, Limiar, Spoleto, Parme, Cencosud, Habib's, Guanabara and Vilma.
According to MAGyP, the bakery sector is among the largest primary food products customers in Argentina and comprises approximately 33,000 bakeries throughout the country. According to Euromonitor, the per capita annual consumption of bread in Argentina was 44.7 kg in 2016. Total per capita annual bread consumption in Argentina is higher than annual consumption in Brazil (24.4 kg) but lower than in Chile (86 kg). Of the total flour produced in Argentina, 52.7% is directed towards the artisanal segment, which includes bakeries and smaller producers of baked goods. According to the FAIM, the remainder is consumed by industrial cookie production, pasta production and bread production which represents 37.5% of the consumption of all milled flour in Argentina.
Approximately 60% of our flour production in Uruguay is branded industrial products sold to third parties and approximately 40% is utilized by our Retail Products segment. Our recently renovated mill in Uruguay is capable of satisfying up to approximately 27% of local demand and is one of the ten largest mills in the country. The wheat for our flour production in Uruguay is primarily sourced domestically.
In Brazil, as eating habits differ from Argentina, the consumption of wheat flour per-capita is lower. We have operations in the south and in the north-east regions of Brazil, which have a favorable tax treatment that leads to significant benefits for operating mills in the area. We expect our Brazilian operations to grow significantly in the coming years as we expect to direct a significant portion of our additional milling capacity to Brazil.
The following chart illustrates the differences in bread consumption between western European countries and the principal markets in which we operate.
Bread Consumption by Country
Data from Euromonitor
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Distribution
As part of our operations, we have dozens of vendors working directly with bakeries and other industrial buyers in Argentina. We service over 3,000 customers directly through our Branded Industrial Products segment. In addition, we have technical staff who visit customers to provide immediate solutions and advice for maximizing the quality of finished products prepared using our milled flour. The geographic distribution of our mills and distribution network allows us to meet our customers' needs. This is complemented by the mills acquired in the Cargill Acquisition which expanded our network. As part of our practice and due to our long-standing business relationships and diversified customer base, we extend credit to our customers.
Our Branded Industrial Products segment in Uruguay has over 59 vendors. Our distribution operations in Uruguay service over 925 branded industrial products customers. In Brazil we have over 25 vendors, through which we service 416 customers.
Export
In addition to our regional sales of branded flour, we also export our various branded flour blends throughout the world. According to Euromonitor, in 2016 we were the largest exporter of flour in Argentina, exporting 233,813 tonnes during 2016, representing 57.9% of the total flour exported from Argentina. We export our flour to countries in six continents, with China as our leading flour export destination accounting for 14% of our total flour exports and Asia as a whole accounting for 48% of our total flour exports.
Soybean Processing
We strategically produce processed soybean on a market opportunity basis, primarily for exports, including soybean flour, soybean oil, emulsifying agents, soybean husks and pellets. Our soybean processing operation typically yields soybean flour (73%), soybean oil (19%), pellets for animal consumption (5.5%) and emulsifying agents (0.6%). We consider our participation in the processed soybean market to be complementary to our strategy of maximizing the proportion of our farmer's agricultural products that we purchase. While we are actively exploring areas to further develop our soy processing activity for purposes of more regular value-added product offerings, we currently only engage in strategic processing when specific market opportunities arise.
Mill Efficiency
Prior to the Cargill Acquisition, we believed our mills were operating at maximum capacity in terms of annual output in tonnes per mill, considering industry standard time for maintenance and certain holidays. Maximum milling capacity is approximately 80% of our installed milling capacity. It takes into account the down-time for periodic preventive maintenance and other activities to maximize each mill's utilization. The mills we acquired as part of the Cargill Acquisition, were relatively under-utilized and operating significantly below their maximum capacity. At the time of acquisition, the acquired mills had been operating at 47.5% of their installed milling capacity for the eight-month period ended August 30, 2016. For the three-month period ended November 30, 2016 the mills acquired with the Cargill Acquisition, were operating at 61% of their installed capacity as compared to 58% for the same three-month period ended November 30, 2015.
Competition
There are approximately 180 milling operations in Argentina, which are primarily regional due to the cost of flour transportation. We believe that both the size of our output and our broad network of mills allow us to meet the needs of businesses across the country. By comparison, we believe that some of our competitors are limited to competing in more regional markets due to the limited network of
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mills with which they operate. According to FAIM, after taking into account the Cargill Acquisition, our mills produced over five times as much in 2015 as our closest competitor mill, Andrés Lagomarsino e Hijos S.A., by reported output.
Packaging
Cañuelas Pack S.A., our packaging subsidiary, provides packaging solutions for industrial food and other products at its 5,000 square meter plant located in the city of Cañuelas. In addition, this company is a pioneer in the fulfillment of the FSSC 22000 food standard, having obtained the applicable certification in July of 2016. Our packaging business is a key component of our vertically integrated business model and gives us a competitive advantage in packaging technology and innovation and allows us to rapidly develop and adjust our packaging needs for new product launches and other changes in marketing.
Our packaging business produced an average of 386 tonnes per month of paper and plastic film-based packaging during the fiscal year ended November 31, 2016. The major inputs in our production process consist of substrates, polypropylene, polyethylene terephthalate, paper, inks and adhesives.
As of November 30, 2016, our principal customer in the packaging business is our own Retail Products segment, which represents 40% of our net sales from packaging. These intrasegment sales were eliminated for combination purposes. The remainder is separated amongst 80 to 90 customers in the consumer food and industrial products industry, such as Cabrales, SanCor, PepsiCo, Nevares, La Nirva, Jorgito and Cinco Hispanos. We provide finished packaging materials to third-party customers and unfinished packaging materials to our Branded Industrial Products segment. In the case of our Retail Products segment, and unlike our third-party customers, we bill for the service of printing and provide materials at cost. As a result, while transactions with our Retail Products segment provides us with volume, the primary source of growth and profitability is from sales to third-party customers.
According to our internal estimates, based on information from industry groups and providers, the size of the packaging market in Argentina was 84,000 tonnes a year for the fiscal year ended November 30, 2015. For the fiscal year ended November 30, 2015 and based on our internal estimates, we believe we are one of six major competitors in the packaging business in Argentina in terms of volume sold. Our primary competitors include Amcor PET Packaging de Argentina S.A., Bolsapel S.A., Celomat S.A., Petropack S.A. and Converflex Argentina S.A.
We believe that the market is driven primarily by price, timing and the quality of services. We have recently acquired newer machinery and are in the process of digitalizing our process to permit deliveries in less than 30 days. This 30-day delivery time is consistent with the market standard. As of the date of this prospectus, we are awaiting machinery to begin processing our own polyethylene sheets from polyethylene pellets in order to produce better laminates. We also believe that the low percentage of packaging materials that are rejected is a good measurement of the quality of our services. The following are images of our packaging machinery:
Agro-Services and Sustainable Sourcing
Through our Agro-Services and Sustainable Sourcing segment, we source agricultural products in which Argentina, the location of our primary sourcing activities, enjoys significant competitive advantages, with the main objective of ensuring the consistent supply of agricultural products to our other business segments at the lowest cost and highest quality possible. We buy agricultural products in excess of our food production needs in order to ensure the selection of the best quality agricultural products for our food production. We seek to become a significant source of demand for the agricultural products grown by each of the more than 8,000 farmers from which we source agricultural products, thereby positioning our business as a reliable source of demand and services for such farmers
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while fostering a long-term relationship that gives us access to the quality and volume of agricultural products we require to support our food production operations to ensure economies of scale, increase our purchasing power and take advantage of market opportunities for our operations abroad.
We obtain all of our agricultural products from third-party farmers or commodities brokers as we do not engage in farming. We foster and preserve direct contact and strong relationships with farmers through our Agro-Services business which acts as a one-stop supplier for farmers in our network providing a variety of products and services, including agricultural supplies such as seeds, fertilizers, farm machinery and other goods, as well as services such as insurance brokerage and, in each case, mostly in exchange for agricultural products. As of the date of this prospectus, we operate 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers located across ten provinces in Argentina, offering convenience to farmers and providing our sourcing business with ready access to a substantial portion of Argentina's productive agricultural area. By offering our farmers the opportunity to purchase production supplies and services with agricultural products, we provide a unique value proposition that allows them to access goods and services without paying cash, thereby reducing their transaction costs, resulting in improved profitability. We also offer drying, storage and conditioning services to our farmers through our 21 conditioning and storage centers which facilitate the geographic distribution of our sourcing operations.
We export a significant proportion of our excess agricultural goods. We also operate our own port, which is located in the Las Palmas port on the right bank of the Paraná River in northeastern Argentina and offers significantly reduced travel times on the Paraná River, resulting in a competitive advantage when compared to ports further upstream. The infrastructure at the Las Palmas port includes both cargo handling and port elevation facilities, servicing activities for our three segments. We expect to continue to use Las Palmas port to further increase our exports into Brazil and other countries in the region. We are also planning the development of an industrial park in Argentina, which we refer to as the Five Nations Industrial Park, next to the Las Palmas port, through which we will seek to attract businesses such as other consumer food product producers that may benefit from the competitive advantages created by our sourcing operations, food product manufacturing capability, distribution network in Argentina and export capacity through the Las Palmas port. For further information, see "BusinessNew Projects and InvestmentsFive Nations Industrial Park". For the fiscal years ended November 30, 2014 and 2015, our Agro-Services and Sustainable Sourcing segment generated AR$14,991 million and AR$14,390 million of net sales, respectively, of which AR$10,700 million and AR$9,640 million, respectively, or 54% and 43% of total net sales, consisted of net sales to third parties and AR$222 million and AR$535 million of Adjusted Segment EBITDA, respectively, or 25% and 49% of our Total Adjusted Segment EBITDA, respectively, for each period. For the fiscal year ended November 30, 2016, our Agro-Services and Sustainable Sourcing segment generated AR$23,284 million (US$1,467 million) in net sales of which $17,318 million, or 54% of our total net sales, consisted of net sales to third parties and AR$571 million (US$36 million) in Adjusted Segment EBITDA, or 25% of our Total Adjusted Segment EBITDA.
Since the main goal of our Agro-Services and Sustainable Sourcing segment is to provide agricultural products to our other segments, thereby maximizing the value of our vertically integrated business model through reliability of supply, access to high quality inputs and optimization of the logistics involved in the production process, we measure our success not only in terms of the financial return of this segment but also in the strength of our relationships with our farmers. We believe that we have developed a brand and reputation that is recognized and trusted by farmers.
Business Lines
Our Agro-Services and Sustainable Sourcing segment encompasses the following business lines: agro-services, sustainable sourcing and port and logistics. The following table shows the percentage of
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net sales of our Agro-Services and Sustainable Sourcing segment attributable to each of the business lines that comprise it:
|
For the Fiscal Year Ended November 30, 2016 |
||||||
---|---|---|---|---|---|---|---|
Business Line
|
Net Sales | Percentage of Net Sales for the Agro-Services and Sustainable Sourcing Segment |
|||||
|
(millions of AR$) |
|
|||||
Sustainable Sourcing |
12,766 | 73.7 | % | ||||
Agro-Services |
4,432 | 25.6 | % | ||||
Port and Logistics |
120 | 0.7 | % |
Sustainable Sourcing
Our sustainable sourcing business line involves the acquisition, storage and commercialization of agricultural products. The main purpose of our sustainable sourcing business is to supply inputs to the food production processes of our Branded Industrial Products and Retail Products segments. The main agricultural products we obtain are wheat, sunflower, soybean, corn, barley and sorghum. With 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers strategically distributed across substantially all of the country's principal agricultural production regions, we are the leader in direct agricultural product sourcing in Argentina, based on total tonnes originated.
We sell agricultural products to both domestic and international oilseed processors, feed manufacturers, millers, livestock producers, intermediaries and wholesale agricultural product purchasers as well as to our other business segments.
The main agricultural products we source from our farmers for our food production processes are wheat and sunflower seeds. Because we aim to strategically position ourselves as a key source of demand for the agricultural production of our network of farmers, we also buy other agricultural products they produce outside of the harvest seasons of wheat and sunflower seeds. Given that our farmer's produces much higher yields (by volume) of soybean and corn than wheat and sunflower seeds, the mix of our sourcing activities reflects higher volumes of soybeans and a substantial amount of corn. We see these two agricultural products as not only complementary to our business, but also strategically important to support a sustainable relationship with our farmers in order to meet our future sourcing needs.
Of the total amount of agricultural products we sourced in Argentina during the fiscal year ended November 30, 2016, 23.7% was wheat, 45.4% was soybeans, 26.5% was corn, and the remainder consisted of sunflower, barley and sorghum. Of the total amount of agricultural products we originated in Uruguay in during the fiscal year ended November 30, 2016, 94% was wheat, 3.5% was corn or sorghum, 2% was soybeans and the remainder sunflower seeds, sorghum and barley.
We obtain our agricultural products from farmers, directly through individual relationships, or through brokers, and either through an exchange for the products and services we provide through our Agro-Services business line or payment in cash. We purchase approximately 70% of our agricultural products from a network of more than 8,000 farmers with whom we have strived to build sustainable and lasting relationships, and we buy the rest of our agricultural products from brokers. We do not directly engage in any farming operation. Due to the proximity of our various mills to most farmers in our network, we are able to offer competitive prices as we benefit from reduced logistics and transportation costs. While location and price are the key factors in sourcing, we strive to maintain the best possible relationships with farmers in our network by offering flexibility in our purchasing
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contracts, a fast decision-making process and a wide array of services and products that are valued by farmers.
For the fiscal year ended November 30, 2016, our agricultural product sourcing business line generated AR$12,766 million of net sales, representing 74% of the net sales of our Agro-Services and Sustainable Sourcing segment. For the fiscal years ended November 30, 2014 and 2015, these figures amounted to AR$7,017 million and AR$4,534 million, respectively, or 72% and 61% of the net sales of our Agro-Services and Sustainable Sourcing segment, respectively.
The following table provides a historical overview of the amount of main agricultural products sourced in the last three fiscal years:
|
Sustainable Sourcing in Argentina for the Fiscal Year Ended November 30,(1) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(tonnes) |
|||||||||
Key Products in Food Production |
||||||||||
Wheat |
2,304,094 | 2,130,781 | 2,100,412 | |||||||
Total Production in Argentina |
13,930,078 | 9,188,339 | 9,803,626 | |||||||
% of Total Production in Argentina Sourced by the Company |
17 | % | 23 | % | 21 | % | ||||
Sunflower |
207,528 | 168,026 | 199,533 | |||||||
Total Production in Argentina |
3,146,258 | 2,063,410 | 3,300,822 | |||||||
% of Total Production in Argentina Sourced by the Company |
7 | % | 8 | % | 6 | % | ||||
Complimentary Products |
||||||||||
Soybean |
3,937,308 | 2,779,817 | 2,455,707 | |||||||
Total Production in Argentina |
61,322,476 | 53,317,720 | 47,745,339 | |||||||
% of Total Production in Argentina Sourced by the Company |
6 | % | 5 | % | 5 | % |
Pricing for agricultural products is based on market prices and set the day we sell agricultural or industrialized products as opposed to the delivery date. This pricing is agreed simultaneously with corresponding sales of agricultural products or manufactured products by us to our customers. As a result, a natural hedge is created whereby each acquisition of agricultural products at a set price is offset by a sale of agricultural products or manufactured products at a corresponding price that takes into account our acquisition margin. While we try to ensure that pricing of contracts matches future corresponding sales in order to create a natural hedge, the amount due to the farmer is determined at the time of final settlement and the payable itself is periodically adjusted by making reference to the open market price of the agricultural product. These contracts typically do not exceed two months in duration. Nevertheless, given that the payable is recorded and adjusted to reflect the open market prices at the time of the closing of the accounting statements, in certain cases, such as is the case with contracts entered into shortly before the end of an accounting period, the amount payable that is recorded at a period or year-end could differ from the amount that is actually paid when due. For further clarification, see Note 2.17 of our audited consolidated combined financial statements.
We acquire a majority of our agricultural products upon delivery to storage facilities we operate. These facilities offer quality segregation, conditioning, elevation and storage services for harvested agricultural products. We currently own and operate 21 storage and elevator facilities located in and around major production areas in Argentina and Uruguay. These are large, efficient and well-maintained agricultural product storage facilities, which we believe create economies of scale and reduce our overall costs. Our facilities are strategically located throughout the country and provide a total static storage capacity of 1,740,000 tonnes. We believe the strategic location of our elevators makes them attractive to farmers within an area of 100,000 to 150,000 hectares. We have also selectively located many of our elevators near our principal suppliers, domestic customers, vegetable oil refineries and key export points to reduce transportation costs and delivery periods for our products.
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The map below illustrates the geographic distribution of our commercial branches, distribution centers and conditioning and storage centers:
In addition to our sustainable sourcing business in Argentina, we have sourcing operations in Uruguay, where we have developed a sustainable sourcing business that helps us supply our Branded
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Industrial Products segment in Uruguay, which has an uninstalled milling capacity equal to 27% of the total installed milling capacity in Uruguay.
Agro-Services
To help foster our sourcing activities we offer farmers an array of goods and services that they acquire, primarily in exchange for agricultural products. We refer to this business line as agro-services. We sell these goods and services at margins that vary by product or service. Our aim is to be a one-stop supplier that provides all services and products needed by farmers in our network. We believe these relationships ensure the strength of our network and thereby enhance the sustainability of our sustainable sourcing business line. As of November 30, 2016, the payments for goods and services provided by farmers is primarily in the form of agricultural products. We believe we are one of the few and among the largest suppliers of these kinds of goods and services in Argentina in exchange for agricultural products.
We try to select products and services that we believe, based on our research, that our farmers need, and that may further help us to strengthen the loyalty of our agricultural product sourcing network. The goods we offer include fertilizers, seeds, and other agricultural supplies. We partner with companies such as Claro, Monsanto and others to deliver these goods. The suppliers of many of the agricultural-related products (such as fertilizers and agrochemicals) that we resell to farmers provide us with extended credit lines such that our obligation to pay for these products matures during the harvest season (when we also receive payment in agricultural product from our farmers). These products also represent our most profitable products with an average margin of 13%, for the year ended November 30, 2016.
The services we offer to farmers include the quality segregation, conditioning and storage of agricultural products, insurance and financial brokerage services and other activities. For the financial and insurance services we act as a broker and take a commission from the respective financial institutions and insurance companies. In addition, we also offer data transmission services to our farmers which we procure from Claro. This service also provides us with a communication platform to contact farmers.
We categorize our farmers as either associated or non-associated. If a farmer (i) procures a majority of our products and services and (ii) we purchase 30-50% of the farmer's production, we consider that farmer to be an associated farmer. We further identify those associated farmers who we believe are thought-leaders in their local community and owners of their fields as VIPs. We provide VIPs with early access to our products and services. As of the fiscal year ended November 30, 2016, we had more than 8,000 farmers who regularly sell us their agricultural products.
Under Argentine law, the payment for these goods and services in exchange for agricultural product provides a further incentive which helps us boost our revenues. We are constantly evaluating the inclusion of new services and products to our portfolio with the aim of strengthening our relationship with farmers in an otherwise commoditized market. Our Agro-Services business line provides us with an important and effective distribution channel reaching a vast network of high-income customers who provide us with significant up-side opportunities in connection with our core sourcing activities.
We believe that, in many cases, we have the ability to incentivize our network of farmers to produce the specific agricultural products that are necessary for our food production business in order to ensure sufficient volume and quality.
The goods and services that we provide are typically sourced directly from major suppliers. The size and scale of our network allows us to negotiate favorable terms with suppliers of agrochemicals,
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fertilizers and other agriculture-related supplies which, in turn, help us maximize our return on the products that we commercialize.
As a standard practice in the agricultural service industry, we typically have up to one year to sell our products on credit from most of our suppliers. As a result, we do not have significant financing needs associated with the sale of goods and services to our network of farmers. Nonetheless, for transactions with farmers which are paid for in agricultural products to be delivered in more than 180 days (representing the duration of a crop cycle from growth to harvest), we include additional fees or adjust the price of agricultural products exchanged since the day of purchase based on the numbers of days elapsed of the specific the crop cycle.
For the fiscal year ended November 30, 2016, our agro-services business line generated AR$4,432 million of net sales, representing 26% of the net sales of our Agro-Services and Sustainable Sourcing segment. For the fiscal years ended November 30, 2014 and 2015, these figures amounted to AR$2,632 million and AR$2,772 million, respectively, or 25% and 29% of the net sales of our Agro-Services and Sustainable Sourcing segment, respectively.
Port and Logistics
Las Palmas Port
As part of our Agro-Services and Sustainable Sourcing segment, we lease from Molca S.A. and operate a large and strategically located port, which allows us to ship agricultural products and manufactured products from our Branded Industrial Products and our Retail Products segments. The objective of the Las Palmas port is to serve as an efficient tool in combination with our other logistics operations. We are not solely dependent on the Las Palmas operations for our exports, as we also export through other Argentine ports. Nevertheless, Las Palmas port allows us to retain a fully integrated portion of our exports business. The Las Palmas port boasts a strategic location on the right bank of the Paraná River in northeastern Argentina near our plant in Pilar and is less than 100 km away from the Buenos Aires port. The terminal is located in the middle of a unique 4,000 meters ridge and has an area of 144 hectares. The port area has a 350 meters wide and 65 feet deep navigable channel which makes the zone appropriate for crossing and allows ships to maneuver comfortably without the need of tug boats. In addition the area also has an additional 300 meters of coastal access and an additional of undeveloped land for future projects. The facility also has significant storage capacity and has a loading capacity of 1.5 million tonnes. Our port currently has 160 employees and will have direct access to the Five Nations Industrial Park we are currently developing. For further information on the Five Nations Industrial Park, see "New Projects and InvestmentsFive Nations Industrial Park" and "Related Party TransactionsMaterial Contracts with Related PartiesLease and Production Agreements with Related PartiesLas Palmas Port Lease".
We believe the Las Palmas port significantly benefits from its strategic geographical location. As Las Palmas port is the closest grain terminal to the entrance of the Paraná River, incoming vessels can avoid the five main shipping routes upriver, which impose limits on a ship's draft and storage capacity, and also save on two tolls and the cost associated with 40 additional hours of pilot travel time to the nearest port of comparable size. The port serves an area which produces a substantial amount of agricultural products annually and benefits from its proximity to such area. We believe that its proximity to the mouth of the Paraná River and the productivity of the surrounding area confers a strategic advantage to the Las Palmas port in comparison to others on the Paraná River. We believe that the port's competitive advantage, its strategic location and the reduced navigation times it offers will lead to time improvements and faster load speeds.
As noted below, we are currently developing an industrial park, which we refer to as the Five Nations Industrial Park near the Las Palmas port. We believe that the industrial park will result in important synergies for us and will increase demand for the Las Palmas port by third parties. For
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further information on the Five Nations Industrial Park, see "New Projects and InvestmentsFive Nations Industrial Park".
Exposure to Individual Farmers
While we seek to maximize the number of goods and services that we provide to farmers in our network, we also seek to diversify the farmers from which we source our agricultural products and other agricultural inputs and minimize our exposure to any region or group of farmers. As a result, we evaluate the provision of goods and services for agricultural products using a credit-committee like structure designed to keep our exposure between 30% and 50% of each individual farmer's total output. In the course of evaluating each farmer, we examine the following major characteristics: business outlook (including business experience), total assets and cash flow. In addition, we evaluate the farmer's credit worthiness by examining their credit rating (using a methodology similar to regulated banking entities in Argentina) and record references as well as their seed type, available land and farming plan. Note 3.3 of our audited consolidated combined financial statements describes our provision for potential defaults in connection with the credit we provide to farmers.
Exports
Once purchased, agricultural products are either transported to one of our storage or processing facilities or sold to other companies in either the export or domestic market. In Argentina, we developed a wide logistics network that transports agricultural products principally by truck and, to a lesser extent, by rail. As part of this network we use trucks which we lease from third parties.
Our international marketing operations link our agricultural products processing operations with our overseas customers while managing commodity, credit, freight and political risks. For the fiscal year ended November 30, 2016, our agricultural products exports consisted of 1,531 million tonnes of agricultural products or 30% of the agricultural product we sourced.
The following map shows some of the current geographic range of our agricultural products exports:
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Competition
Markets for our Agro-Service and Sustainable Sourcing segment products are highly competitive, in large part because our products in this segment are agricultural products subject to relatively straight-forward product substitution. Competition is principally based on price, quality, product and service offerings, geographic location and relationship with farmers. Major competitors include but are not limited to: Molinos Río de la Plata S.A., certain agricultural cooperatives such as the Asociación de Cooperativas Argentinas C.L. and large regional companies such as Bunge Ltd.
Seasonality
The activities in our Agro-Services and Sustainable Sourcing segment are inherently seasonal. Farmers generally harvest and sell wheat from December through February, sunflower seeds from February through March and soybeans from April through August. As a result the majority of our sourcing, port and export activities are concentrated during December to January in the case of wheat and February through August in the case of sunflower seeds and soybeans.
In relation to our Retail Products and Branded Industrial Products segments, we believe there is no significant seasonality in our products, however, certain products tend to experience a slight volume increase during winter months. Vegetable oils are sold all year round and flours have a higher consumption rate during the winter months. Cookie sales tend to decrease during the summer, with sweet cookies being the most affected.
As a result of the above factors, there may be significant variations in our financial results from one quarter to another in connection with the seasonality of our Agro-Services and Sustainable Sourcing segment. See "Risk FactorsRisks Related to our BusinessOur business is seasonal, and our cash flow may fluctuate significantly depending on the crop growing cycle".
New Projects and Investments
As part of our business plan we are always evaluating new investment opportunities to further develop our vertically integrated business and improve our results. Our main areas of focus for growth currently are: regional development, business line expansion and retail and food service expansion. As of the date of this prospectus, we are currently exploring and developing the following new opportunities:
Retail and Food Services Expansion
At the Spegazzini facility we currently have production lines for the following frozen food products:
We anticipate that our expansion of the frozen business will include:
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With the increased production capacity resulting from the Spegazzini expansion, we intend to launch innovative products using new production lines such as doughnuts, jellied doughnuts, muffins, cupcakes and brownies.
In addition, we are currently supplying McDonald's, YPF and Shell with frozen bread products. We have already begun supplying local McDonald's franchises with Kaiser rolls for breakfast meals. Similarly, we have begun supplying pastries and croissants (medialunas) to YPF and Shell convenience stores. In connection with these activities, we have identified a significant opportunity in the convenience food category.
Retail Pizza
Through our subsidiary, Molinos Puntanos S.A., we have begun developing direct-to-consumer retail projects with the goal selling the retail products that we develop directly to the end-consumers. The first of these projects is our Pizza Alla Pala project. Our Pizza Alla Pala project has the goal of creating a leading retail space built on the principles of quality, innovation and an appealing brand. We make pizza using our frozen food products and serve it on unique stylish wooden boards designed to evoke traditional pizza making. The product is unique in that it offers on-the-go offerings with pre-frozen food products which offer more variety and consistent freshness. Its square shape also permits easier slicing. The products sold at Pizza Alla Pala are designed for both sit-down and on-the-go consumption. These pizzas can be sliced in different portions for consumer ease.
We hope to offer a high quality retail product based on our high quality ingredients and improved technology. We believe that our pizza's unique format contributes to our brand recognition and increases the appeal of our product. We further believe that the use of our high-quality ingredients along with the pizza's unique presentation will result in an innovative product which appeals to consumers due in part to its competitive price. We have currently opened only one Pizza Alla Pala store, but are actively evaluating future openings.
Five Nations Industrial Park
As part of the further development of activities at the Las Palmas area, we are currently evaluating the development of an industrial park in the Las Palmas area, which we call the Five Nations Industrial Park. As of the date of this prospectus, we are still evaluating the financing and expenses associated with the project and we do not have capital expenditures or a timetable set at for this expansion. In the course of its development, we will look to invite global producers of value-added products with internationally recognized brands that will use inputs from our Agro-Services and Sustainable Sourcing and Branded Industrial Products segments. We intend to offer these global producers our sourcing capacity and value-added agricultural products production as well as our distribution networks in Argentina, Uruguay, Brazil, Bolivia and Paraguay in order to further capitalize on our integrated value chain and logistics network. We hope to act as both a supplier and an end-to-end distributor for companies producing industrial and consumer products in the Five Nations Industrial Park by sourcing agricultural products and also providing delivery and shipment of finished products through the Las Palmas port.
In connection with the development of the Five Nations Industrial Park, we intend to expand our cargo container operations at Las Palmas port. We expect to undertake the expansion of the Las Palmas port concurrently with the development of the Five Nations Industrial Park. We are still evaluating the financing and expenses associated with this project. We believe that the Las Palmas port will further increase the appeal of this location as a potential production and regional distribution hub.
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The property in which the Las Palmas port and the Five Nations Industrial Park are located is currently owned by our affiliate, MOLCA S.A. Under the terms of our leasing agreement with MOLCA S.A., we lease these properties for US$1.5 million per year. For a further description of this agreement, see "Related Party TransactionsMaterial Contracts with Related PartiesLease and Production Agreements with Related PartiesLas Palmas Port Lease".
Megaseed
Megaseed S.A. is one of our subsidiaries dedicated to research and development of agricultural products with a focus on genetic innovation of wheat seeds and technological investment. Megaseed's product development goals include:
Environmental and Quality Management
In connection with our various business operations, we comply with several international and local quality standards. In 2014, we applied for certain environmental and food safety standards under the International Standardization Organization, or ISO, for all of our facilities. We obtained these certifications during 2014 and 2015. Currently, all of our retail product production facilities are in compliance with ISO 9001, ISO 14001, OHSAS 18001, FSSC 22000 and SEDEXSMETA for retail products. In addition the Las Palmas port are in compliance with ISO 14001. Our packaging business is certified with ISO 22000 and is currently in the process of obtaining its ISO 14001 and OHSAS 18000 certification.
In addition to the foregoing, we are required under our IFC Facility, to remain compliant with ISO 14001 and OHSAS 18001. Our facilities are subject to an annual audit to confirm compliance with standards and with our obligations under the IFC Facility agreement. For further details on the IFC Facility agreement and its terms, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of OperationsIndebtedness".
We also periodically conduct internal audits to ensure our compliance with applicable standards. In addition, each of our facilities has both a quality management and occupational health, safety and environmental standards supervisor who are responsible for maintaining the management system on an annual basis. Our supervisors at each facility are subject to spot audits by management and also participate in interplant audits to ensure that any improvements or best practices at any one of our facilities is disseminated throughout each facility.
Research and Development
The core purpose of our research and development operation is to foster innovations, develop improved versions of our existing products and develop new product offerings. These goals require constant research, testing of new designs and packaging and focus group testing with our customers. We also attend exhibitions and trade shows in other countries, especially in Europe. For example, our vegetable oil nozzle was developed after several testing trials of different types of nozzles offered in European exhibitions and trade shows. The results of these trials provided data which, after a detailed analysis, allowed us to choose the vegetable oil nozzle that best fit our consumers' needs.
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Each of our production facilities has a research and development group focused on both optimization and product research. Though based at separate locations, our research and development operations are centrally managed and planned. Our research labs have modern equipment in order to ensure that our quality control and other activities are carried out effectively.
Our research and development purpose has allowed us to develop and launch products with new features in the Argentine market. For example, we were the first producer of flour fortified with vitamins through our Pureza brand. Following our successful launch, the Administración Nacional de Medicamentos, Alimentos y Tecnología Médica (National Administration of Medicine, Food and Medical Technology), which we refer to as the Argentine Food Regulator, visited us in order to better understand the ingredients and technology used for the production of this fortified flour. The Argentine Food Regulator later enacted the regulation which now requires every producer of flour for human consumption to be enriched with certain minerals, including iron, folic acid, thiamine, riboflavin and niacin.
In addition, our Branded Industrial Products segment has also developed various ready-mixed flours for different styles of bread, including for the elaboration of French breads and other products by artisanal bakeries.
We believe our Pureza products with whole wheat flour and self-rising flour with natural yeast are the first products with these ingredients in Latin America and currently have over ten years in the market. The natural yeast based self-rising flour is a product developed after research into consumers eating habits in Argentina. The results showed that consumers (especially young consumers and young mothers) required faster cooking times for home-made pizza. As a consequence, we developed self-rising flour which (i) permitted a ten minute preparation time and ten minute cooking time (compared to a two hour preparation and cooking time with regular flour), (ii) included natural yeast instead of chemical yeast, and (iii) was offered at a competitive price when compared to flour and yeast purchased separately.
In regards to product development, we have developed and launched the following products:
In addition to our product development, our other recent developments include:
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Trademarks
Our products are marketed under a variety of valuable trademarks. Some of the more important trademarks used in our global operations include Pureza, Cañuelas, 9 de Oro, Multiple, San Agustín, Mamá Cocina, Paseo, and Cukis, among others. We protect these trademarks as appropriate through registrations in Argentina and other jurisdictions. We defend our registered marks through oppositions to new trademark applications when we believe that a new proposed brand infringes on our trademarks. We have several opposition actions in Argentina, Paraguay and Brazil as part of the regular defense of our trademark portfolio. We do not believe that any of these actions or any other proceedings could materially adversely affect our trademark portfolio.
Depending on the jurisdiction, trademarks are generally valid as long as they are in use or their registrations are properly maintained and they have not been found to have become generic. Our entire trademark portfolio is registered and owned by us in Argentina and the majority of it has been registered in the other countries in which we operate or sell, including Brazil, and Uruguay. In Brazil and Uruguay, our Pureza brand has not been registered as the name is considered generic. We do not commercialize our products under the Pureza brand in Uruguay. In Brazil, we have registered the brand Pureza Premium. Additionally, our Paseo brand has not been registered in Bolivia, Chile and Brazil.
Properties and Facilities
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Retail Products and Branded Industrial Products Segments
We manufacture our branded industrial products in our 21 production facilities in the region as well as two third-party production plants in Argentina. The following table provides an overview of our various facilities, their location, ownership and operational activity:
Facility
|
Province, Country |
Production Capacity (tonnes per year) |
Current Use | Certifications | Utilization Rate of Branded Industrial Product Line(1) |
Utilization Rate of Retail Product Line(2) |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Central Administration |
Buenos Aires, Argentina | Offices | ISO 27001 | |||||||||
Next Generation Refined Oil Industrial Plant |
Buenos Aires, Argentina |
(i) Flour (branded): 948,865; (ii) Flour (retail): 182,398; (iii) Vegetable Oil: 88,000 (iv) Ready-mixed; Products: 31,771 (v) Bread Crumbs: 7,128 |
Flour; Vegetable Oil; Ready-mixed Products; Bread Crumbs | ISO 9001:2008; ISO 14001:2004; OHSAS 18001:2007; ISO 22000:2005; FSSC 22000; GMP+B2: 2010 | 68% Flour | 65% Flour, 93% Vegetable Oil, 26% Ready-mixed Products, 100% Bread Crumbs | ||||||
Río Cuarto |
Córdoba, Argentina | Pasta: 12,000 | Pasta | ISO 9001:2008; ISO 14001:2004; ISO 22000:2005; OHSAS 18001:2007 | 50% | |||||||
Granadero Biagorria Plant |
Santa Fe, Argentina | Cookies and Biscuits: 31,560 | Cookie and Biscuit Production | ISO 9001:2008; ISO 14001:2004; ISO 22000:2005 and OHSAS 18001:2007 | 73% | |||||||
Carlos Spegazzini Facility |
Buenos Aires, Argentina |
(i) Cookies: 19,448; (ii) Frozen Foods: 17,652 |
Cookies; Ready-mixed Dough; Frozen Foods. | ISO 9001:2008; ISO 14001:2004; OHSAS 18001:2007; ISO 22000:2005; FSSC 22000 | 32% Cookies; 48% Frozen food products | |||||||
Salta |
Salta, Argentina |
(i) Flour (branded): 10,000; (ii) Flour (retail): 68,000 |
Flour; Ready-mixed Products |
ISO 9001:2008; ISO 14001:2004; ISO 22000:2005; OHSAS 18001:2007 | 93% Flour | 100% | ||||||
Tucumán |
Tucumán, Argentina | Flour (branded): 91,000 | Flour; Ready-mixed Products | 46% | ||||||||
San Luis |
San Luis, Argentina | Balanced Meal: 30,000 | Balanced Meal | 2% | ||||||||
Adelia María |
Córdoba, Argentina | Flour: 232,000 | Flour; Ready-mixed Products |
ISO 9001:2008; ISO 14001:2004; OHSAS 18001:2007; ISO 22000:2005; FSSC 22000 | 90% | |||||||
Molinos Florencia |
Córdoba, Argentina | Flour (branded): 267,000 | Flour | 93% | ||||||||
Realico |
La Pampa, Argentina | Flour (branded): 85,680 | Flour | In process to be transferred | 65% | |||||||
Chacabuco |
Buenos Aires, Argentina | Flour (branded): 168,840 | Flour | In process to be transferred | 82% | |||||||
Pigüe |
Buenos Aires, Argentina | Flour (branded): 177,169 | Flour; Ready-mixed Products |
ISO 9001:2008; ISO 14001:2004; OHSAS 18001:2007; ISO 22000:2005; FSSC 22000 | 85% | |||||||
Tres Arroyos |
Buenos Aires, Argentina | Flour (branded): 151,200 | Flour | 50% | ||||||||
Resistencia |
Chaco, Argentina | Flour (branded): 73,080 | Flour | 70% | ||||||||
Rosario II |
Santa Fe, Argentina | Flour (branded): 138,600 | Flour | 71% |
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Facility
|
Province, Country |
Production Capacity (tonnes per year) |
Current Use | Certifications | Utilization Rate of Branded Industrial Product Line(1) |
Utilization Rate of Retail Product Line(2) |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Pilar |
Buenos Aires, Argentina | Flour (branded): 320,040 | Flour | 63% | ||||||||
Cañuelas Pack |
Buenos Aires, Argentina | Packaging: 5,100 | Packaging | FSSC 22000 | 99% | |||||||
San Justo |
Buenos Aires, Argentina | Flour: 126,000 | Flour | 69% | ||||||||
Molino Ameriano |
Montevideo, Uruguay | Flour (branded): 105,000 | Flour; Ready-mixed Products | 72% | ||||||||
Moinho Cañuelas |
Salvador Bahia, Brazil | Flour (branded): 99,000 | Flour; Ready-mixed Products | 98% |
As of the date of this prospectus, the certification of mills acquired in connection with the Cargill Acquisition are still being transferred by Cargill.
Agro-Services and Sustainable Sourcing Segment
Our Agro-Services and Sustainable Sourcing segment has 62 branches, 44 one-stop supply stores and 21 conditioning and storage centers strategically distributed across substantially all of the country's principal agricultural production regions. We also have storage facilities at our soybean and corn processing plants where we store agricultural products from farmers and other sellers directly for processing.
The following table lists our commercial branches in Argentina and their location:
Facility Name
|
Province | |
---|---|---|
Adelia María | Córdoba | |
Alcira Gigena | Córdoba | |
Alejo Ledesma | Córdoba | |
Azul | Buenos Aires | |
Bahia Blanca | Buenos Aires | |
Balcarce | Buenos Aires | |
Bandera | Santiago del Estero | |
Bell Ville | Córdoba | |
Canals | Córdoba | |
Casbas | Buenos Aires | |
Charata | Chaco | |
Charras | Córdoba | |
Chivilcoy | Buenos Aires | |
Córdoba | Córdoba | |
Coronel Baigorria | Córdoba | |
Coronel Moldes | Córdoba | |
Coronel Pringles | Buenos Aires | |
Coronel Suarez | Buenos Aires | |
Daireaux | Buenos Aires | |
Etruria | Córdoba | |
Gancedo | Chaco |
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Facility Name
|
Province | |
---|---|---|
General Belgrano | Buenos Aires | |
General Levalle | Córdoba | |
General Pinto | Buenos Aires | |
Gonzalez Chaves | Buenos Aires | |
Gualeguay | Entre Ríos | |
Gualeguaychu | Entre Ríos | |
Huinca Renanco | Córdoba | |
Inriville | Córdoba | |
Intendente Alvear | La Pampa | |
Jesús Maria | Córdoba | |
Jovita | Córdoba | |
La Carlota | Córdoba | |
Laboulaye | Córdoba | |
Las Acequias | Córdoba | |
Lincoln | Buenos Aires | |
Lobos | Buenos Aires | |
Marcos Juarez | Córdoba | |
Necochea | Buenos Aires | |
Pehuajo | Buenos Aires | |
Pigüé | Buenos Aires | |
Presidencia Roque Saenz Peña | Chaco | |
Pueblo Italiano | Córdoba | |
Realico | La Pampa | |
Ricardone | Santa Fe | |
Rio Cuarto | Córdoba | |
Río Primero | Córdoba | |
Sacanta | Córdoba | |
Saladillo | Buenos Aires | |
Salta | Salta | |
Sampacho | Córdoba | |
San Antonio De Areco | Buenos Aires | |
San Francisco | Córdoba | |
Tandil | Buenos Aires | |
Tres Arroyos | Buenos Aires | |
Tucumán | Tucumàn | |
Vedia | Buenos Aires | |
Venado Tuerto | Santa Fe | |
Vicuña Mackenna | Córdoba | |
Villa María | Córdoba | |
Villa Mercedes | San Luis | |
Villa Valeria | Córdoba |
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The following table lists our one-stop supply stores:
One-Stop Supply Stores
|
Province | |
---|---|---|
Adelia María | Córdoba | |
Alcira Gigena | Córdoba | |
Bell Ville | Córdoba | |
Canals | Córdoba | |
Casbas | Buenos Aires | |
Charata | Chaco | |
Charras | Córdoba | |
Chivilcoy | Buenos Aires | |
Coronel Pringles | Buenos Aires | |
Etruria | Córdoba | |
General Levalle | Buenos Aires | |
General Pinto | Buenos Aires | |
Gonzalez Chaves | Buenos Aires | |
Huinca Renanco | Córdoba | |
Intendente Alvear | La Pampa | |
Jesús Maria | Córdoba | |
Jovita | Córdoba | |
La Carlota | Córdoba | |
Laboulaye | Córdoba | |
Lincoln | Buenos Aires | |
Lobos | Buenos Aires | |
Pigüé | Buenos Aires | |
Presidencia Roque Saenz Peña | Chaco | |
Realico | La Pampa | |
Rio Cuarto | Córdoba | |
Sacanta | Córdoba | |
Saladillo | Buenos Aires | |
San Francisco | Córdoba | |
Tandil | Buenos Aires | |
TLP (Zarate) | Buenos Aires | |
Tres Arroyos | Buenos Aires | |
Tucumán | Tucumàn | |
Vedia | Buenos Aires | |
Venado Tuerto | Santa Fe | |
Villa María | Córdoba | |
Villa Mercedes | San Luis | |
Sampacho | Córdoba | |
Inriville | Córdoba | |
Gualeguay | Entre Ríos | |
Gualeguaychu | Entre Ríos | |
Coronel Suarez | Buenos Aires | |
Daireaux | Buenos Aires | |
Gancedo | Chaco | |
Alejo Ledesma | Córdoba |
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The following table lists the agricultural product conditioning and storage centers in Argentina:
Plant or Storage Facility
|
Province | |
---|---|---|
Adelia María | Córdoba | |
Avia Terai | Chaco | |
Cabred | Buenos Aires | |
Capilla del Señor | Buenos Aires | |
Coronel Suarez | Buenos Aires | |
De Bary | Buenos Aires | |
General Lavalle | Buenos Aires | |
Gonzalez Chaves | Buenos Aires | |
Hilario Lagos | La Pampa | |
Huinca Renanco | Córdoba | |
Justo Daract | San Luis | |
Laboulaye | Córdoba | |
Monte de los Gauchos | Córdoba | |
Pigüé | Buenos Aires | |
Pinedo | Chaco | |
Ricardone | Santa Fe | |
Río Cuarto | Córdoba | |
San Pedro de Guasayan | Santiago del Estero | |
Vedia | Buenos Aires | |
Vicuña Mackenna | Córdoba | |
Washington | Córdoba |
Employees
As of November 30, 2016, we had approximately 3,000 full and part-time employees. In Argentina, our employees are represented by nine unions and approximately 60% of them benefit from collective bargaining agreements.
The collective bargaining agreements to which we are a party are comparable to other such agreements in Argentina and are mandatory for the companies that perform the activities described in each of them. We are party to nine collective bargaining agreements in Argentina.
In addition to our collective bargaining agreements in Argentina, our mill employees in Uruguay are also members of the Federación de Obreros y Empleados Molineros y Afines. In November of 2016, the union in Uruguay was holding salary negotiations at a national level. In connection with these negotiations, the union entered into a series of work stoppages that lasted five days. In addition, in May of 2015 there was a nation-wide strike of the union for vegetable oil workers in Argentina known as the Aceiteros. This strike lasted for 26 days and corresponded to national labor negotiations. Other than this brief stoppage in our Uruguay facility and the national strike in Argentina which affected our operations, we have not had a labor stoppage or other material labor dispute in the last three years.. For further information on the risk of labor disputes, see "Risk FactorsRisks Related to Our BusinessFailure to maintain our relationships with labor unions may have an adverse effect on us".
Food Quality and Safety Regulations
Our activities are subject to a wide range of national, provincial and municipal rules and regulations, mainly in the areas of the environment, public health, social security and consumer protection. As of the date of this prospectus, we believe we are in compliance with the legal framework of the countries in which we operate. We also possess all of the required material permits and licenses for carrying out our activities.
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Below is a summary of the primary regulations to which our activities are subject to:
Consumer Protection Regulation
Pursuant to the Argentine Consumer Protection Law, its complementary regulation (such as the Argentine Fair Trade Law No. 22,262 and the Argentine Antitrust Law No. 25,156), and the Argentine Civil and Commercial Code, there are a number of rules related to consumer protection to which we are subject.
According to the Consumer Protection Law, individuals and both private or public entities engaged in commercial activities, even if occasional, or dedicated for example to the production, importation, distribution and commercialization of goods or services to consumers or end-users, are considered suppliers of these goods and services. As a result, they are subject to the rules under the Consumer Protection Act and other regulations that protect consumers.
The Consumer Protection Law establishes a set of obligations to suppliers that aim to protect the consumers through specific provisions that outline the liability of each party participating in a consumer transaction. For example, the regulation provides that an offer made to potential and unknown customers obliges the supplier for all the time the offer is public or until its public revocation. In addition, the regulation establishes that the terms included in advertisements, announcements, prospects, mailshots and in general, any public communication, bind the seller or supplier and shall be part of any agreement with a consumer. Non-compliance with the terms of an offer (as described by the applicable law) shall be considered an unjustified refusal and may lead to sanctions which may vary of up to AR$5 million (approximately US$315,060 according to the venta de divisas exchange rate reported by the Banco de la Nación Argentina as of November 30, 2016) in fines, besides the possible application of punitive damages, to severe sanctions such as the mandatory closing of an establishment in order to prevent suppliers from violating more regulations.
In general, the supplier may be liable for any damage a consumer may suffer as a consequence of the use of the good or service. However, the Consumer Protection Law imposes joint liability on the producer, the manufacturer, the importer, the distributor, the supplier, the seller and the owner of the relevant trademark, for all the damages caused by any damaged or risky good or service. To avoid any such potential liability the supplier must prove that the damage was not caused by it.
Finally, according to Consumer Protection Law, certain clauses of the agreements between sellers and consumers are considered null or void, including, for example, those which provide exemptions or waivers for the benefit of suppliers.
Food Production Regulation
As a manufacturer of primary food products, we are subject to environmental and administrative regulations, both at a federal and provincial level. Pursuant to the Argentine Federal Code on Food, establishments that produce, manufacture or process food products must register with the National Registry of Establishments before commencing any activity. Each of our locations involved in the production of primary food products is registered with the National Registry of Establishments. In addition, each of our branded industrial products must be registered, before its sale, at the National Registry of Food Products.
Due to our significant number of activities related to the storage, processing, distribution, resale and transportation of agricultural and primary food products, we are subject to the provisions of the Argentine Federal Code on Food and other complementary rules such as MAGyP Resolution No. 21-E/2017. This resolution requires that Argentine entities like us, which carry out activities related to the trade and/or industrialization of primary food products, must register with the Sole Registry of the Agro-Industrial Chain (Registro Único de Operadores de la Cadena Agroindustrial, or "RUCA" for its acronym in Spanish). We are currently registered and in compliance with Resolution No. 21-E/2017.
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In addition to general regulations applicable to food products, we are also subject to specific regulations for some of the foods that we produce. For example, all producers of wheat flour must register before the Argentine National Institute of Food. In addition to requiring our registration, the Argentine National Institute of Food maintains a database which gathers information on every wheat flour producer, including ourselves.
In addition, we are subject to Argentine Law No. 25,630 which provides that wheat flour for human consumption must be enriched with certain minerals, including iron, folic acid, thiamine, riboflavin and niacin.
Export/Import
As a commercial operator dedicated to the export and/or import of animal or vegetable products, we are required to register with the Argentine Registry of Importers and Exporters (Registro de Exportadores y/o Importadores) in accordance with Resolution No. 492/2001 enacted by the Argentine National Food Safety and Quality Service (Servicio Nacional de Sanidad y Calidad Agroalimentaria) or SENASA. Resolution No. 492/2001 requires that the import or export of any animal or vegetable, including their reproductive materials, any derived products, any animal or vegetable byproduct and any products containing animal or vegetable ingredients must be registered with the Argentine Registry of Importers and Exporters, which is managed by SENASA.
We are also required to provide sworn affidavits (declaración jurada de ventas al exterior), which we refer to as DJVE, relating to the agricultural products that we export in accordance with Argentine Law No. 21,453. Argentine Law No. 21,453 requires companies with the Argentine Unit of Coordination and Evaluation of Subsidies for Internal Consumption, (Unidad de Coordinación y Evaluación de Subsidios para el Consumo Interno), to provide these affidavits in order to calculate the applicable tax rate to which they are subject.
Finally, the Argentine Federal Office of Commercial Agricultural Control, Oficina Nacional de Control Comercial Agropecuario, enacted Resolution No. 543/08 which creates the requirements for those exporters subject to providing a DJVE. We are subject to these requirements as part of our export activities. This resolution was subsequently amended by the Macri administration in 2015, to provide more transparency and flexibility under the DJVE regime and promote exports.
Environmental Matters
As of the date of this prospectus, we are not involved in any clean-up sites or activities related to waste disposal operation. Our operations are subject to a number of national, provincial and municipal environmental regulations.
Beginning in 2002, Argentine law regulates the minimum standards for achieving environmental sustainability and the preservation of biodiversity. Any project or activity capable of significantly degrading the environment or which may adversely affect quality of life, is subject to an environmental impact study prior to being carried out. In addition, under Argentine law, any actual damage to the environment triggers additional duties and obligations which require the restoration of the environment to its former condition or, if not technically feasible, the payment of compensation to a specific fund.
Argentine administrative laws and regulations regarding environmental protection are primarily instituted at the provincial level. Their applicability to any industrial or service activities ultimately depends on where such activities are carried out. For that reason, any commercial industrial or service facility must maintain its own environmental permit in accordance with applicable local regulations.
Such permits are required for various industrial and commercial activities including: (i) the generation, storage, transport and disposal of hazardous and infectious wastes, (ii) the use of equipment subject to high pressure levels, (iii) the use of fuel tanks, (iv) the use chemical of precursors (including registration requirements with the National Registry of Chemical Precursors or Registro
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Nacional de Precursores Químicos), (v) the use disposal and storage of pesticides, agrochemical products and crop protection agents and (vi) the disposal of liquid waste and gas emissions, among others. The use of public water is also subject to the granting of permits by each provincial jurisdiction.
Any violation of the aforementioned laws or any other provincial environmental laws and regulations may subject us to civil, criminal and administrative penalties, including an obligation to engage in environmental remediation, the payment of damages and the closure of non-compliant or infringing facilities. In addition, tort and criminal liability may also be extended to our executive officers, directors, statutory auditors and/or other officers who participate in the company's decision-making process.
Our facilities and field activities may involve the use of potentially hazardous material, which are subject to health, safety and environmental regulations.
As of the date of this prospectus, we believe that neither the outcome of any existing environmental, judicial and/or administrative proceedings nor our compliance in general terms with material environmental laws or regulations will have a material adverse effect upon our capital expenditures, earnings, or competitive position.
Insurance
The type and level of insurance coverage we obtain is determined based on our consultation with leading insurance brokers. We are insured with leading local insurance companies against a variety of risks, including civil liability, fire and property damage and export credit risk. We believe our level of insurance coverage is customary and appropriate for a company of our size and with respect to our activities.
We believe that our insurance coverage is reasonable in amount and consistent with industry standards in the countries in which we operate, and do not anticipate being unable to renew any of our insurance policies.
Changes in Argentine Politics
Presidential and Congressional elections in Argentina took place on October 25, 2015, and a runoff election (ballotage) between the two leading Presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina. The Macri administration assumed office on December 10, 2015 and since then, has announced several significant economic and policy reforms, including:
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US$25,000, and a discounted applicable tax of 5% on property and assets worth up to US$80,000. Above that threshold, the applicable tax was 10% until the end of 2016 and 15% until the end of March 2017, when the amnesty window closed.
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order to determine the character of the illness or contingency, the disability and the corresponding pecuniary benefits provided for under the Labor Risks Law.
Legal Proceedings
In the ordinary course of business we are subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, social security, labor lawsuits and other matters. We make provisions for these liabilities when it is probable that future costs will be incurred and the amount of such costs can be reliably estimated. We measure provisions at the present value of the future costs using a pre-tax rate that reflects the current market assessment of the time value of money and the risks associated with our legal liabilities.
From time to time we are involved in various lawsuits and other proceedings. As of the date of this prospectus, we do not believe that these proceedings, individually or in the aggregate, will have a material adverse impact on our business, results of operations and financial condition, taking into account the provisions accounted for at the end of our last fiscal quarter.
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Our revenues are substantially generated by our operations in Argentina. Brazil and Uruguay have also reached significant size and have an important contribution to total sales while Chile and Bolivia, because of the size of those markets and our more recent entry into those markets are relatively smaller contributors to total sales.
Overview of the Argentine Economy
Since assuming office in December 2015, the Macri Administration has announced and implemented several economic and policy reforms in an effort to correct existing imbalances and foster investment and economic growth, which have raised high expectations for the future economic performance of Argentina. Some of these measures impact our operations directly and will potentially result in significant improvement of the environment for our business. For a detailed description of these measures see "BusinessChanges in Argentine Politics".
Macroeconomic Projections
The impact that these recent policies and other future measures to be adopted by the Macri Administration will have on the Argentine economy cannot be predicted. However, the planned normalization and liberalization of the economy is expected to be positive for business by stimulating economic activity, and rebalancing the main economic drivers. Some important indicators include:
Industry Overview
Packaged Food Industry
The packaged foods market is comprised of bread, pasta, pastries and cookies, crackers and biscuits. Despite the challenging macroeconomic scenario in recent years in Argentina, the packaged food market both in Argentina and the surrounding region has grown every year from 2011 to 2016, according to Euromonitor.
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The following charts show volume growth in the packaged foods market in Argentina and the region since 2012.
Regional(1) Packaged Food Sales ('000 Tonnes) | Argentina Packaged Food Sales ('000 Tonnes) | |
Source: Euromonitor, IMF and INDEC | Source: Euromonitor, IMF and INDEC | |
(1) Includes Argentina, Bolivia, Brazil, Chile and Uruguay |
Sales of packaged food in the region and in Argentina for the period from 2012 through 2016 had a CAGR of 2.1% and 5.3%, respectively, which was primarily due in both cases to increased adoption by consumers of newer convenience food formats.
Prepared Meals Market Trends
Our Retail Products business segment is a sub-category of the prepared meals market. In recent years, the market has looked at more convenient and easier meal options that require less effort to cook, consume, or can be stowed away for longer periods of time. Through our portfolio of practical products, ranging from ready-mixed products to frozen foods, we have developed a unique offering that matches consumers' changing preferences.
According to Canadean Ltd., consumers in Argentina are shifting away from traditional cooking and meal options and increasing their consumption of ready, on-the-go prepared meals.
The following charts show the recent growth, in both Argentina and the surrounding region, of the three principal categories of the prepared meals market by sales volume:
Regional(1) Convenience Food Sales (mm kg) | Argentina Convenience Food Sales (mm kg) | |
Source: Euromonitor, IMF and INDEC | Source: Canadean | |
(1) Includes Argentina, Bolivia, Brazil, Chile and Uruguay |
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From 2012 through 2016, sales of convenience food in the region and in Argentina had a CAGR of 7.4% and 9.7%, respectively, which was primarily due in both cases to increased adoption by consumers of newer convenience food formats.
For the year ended 2016, the prepared meals market in Argentina had a sales volume of approximately 7.4 million kg, representing a 10.7% increase compared to 2015. From 2011 to 2016, the prepared meals market had an average growth rate of 9.0% in terms of volume. Although the prepared meals category includes certain products, such as meals kits including full course meals, which we do not produce, the vast majority of the growth is driven by pizza and other ready meals which are expected to grow within our portfolio, in part due to our recent and planned investments in increased production capacity at the Spegazzini facility.
Categories in our Retail Products Segment
Vegetable Oils
The market for edible oils has shown consistently positive volume growth in Argentina and the region. The vegetable oils business line represented 36.7% of the net sales of our Retail Products segment for the fiscal year ended November 30, 2016. Argentina is one of the most attractive markets for this category, given the high levels of vegetable oil consumption per capita.
The Argentine vegetable oils market, which reached a value of US$482 million in 2016, had a CAGR of 2.8% for the period from 2012 through 2016, which was primarily due to a combination of marginal growth in consumption per capita and an increase in population. Similarly, the CAGR of 0.6% for the regional vegetable oils market (which includes Argentina, Bolivia, Brazil, Chile and Uruguay) for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
Our product offering within the vegetable oils category includes sunflower, soy, corn and olive oil. In Argentina, sunflower oil represents nearly 50% of the total consumption of the country for the year ended 2016. Together, the four sub-segments we operate represented 54% of the total volume of vegetable oils in Argentina in 2016, according to Euromonitor.
Bread
One of the main uses of flour is bread production. In Argentina, the bread market had a market size in 2016 of US$2.6 billion for the year ended 2016 according to Euromonitor. Argentina has a per capita consumption of bread of 44.7 kg. Our flour business line represented 33% of the net sales of our Retail Products segment for the fiscal year ended November 30, 2016.
Positive market trends in wheat flour derivative products such as the bread market exist and show steady, positive volume growth despite swings in economic activity. Additionally, bread consumption in the markets in which we operate still lags significantly when compared to that of, for example, western European markets, which we believe highlights the still significant room for long-term growth.
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The following chart illustrates the differences in bread consumption between western European countries and the principal markets in which we operate:
Bread Consumption by Country
Data from Euromonitor
In volume terms, the Argentine market reached 1.96 million tonnes in 2016, after several years of relatively low growth of 0.5% CAGR for the period from 2012 through 2016, due to price increases and economic stagnation, as indicated in the chart below. However, outlook remains positive and significant growth is expected for the next years particularly in more value added products (such as fortified products, frozen breads and others).
Regional(1) Sales of Bread
Data from Euromonitor, IMF & INDEC
The CAGR of 0.5% for regional sales of bread for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population. Similarly, the CAGR of 0.5% in Argentine sales of bread for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
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The CAGR of 1.6% for Argentine consumption of pasta for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population. Similarly, the CAGR of 2.5% in Argentine sales of pasta for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
Pastries
We are reliant upon the pastries market due to the fact that our frozen foods, Puntos Caliente and foodservice business segments are significantly pastry-focused. We will likely benefit from the strength of the pastries segment in Argentina, as we envision additional product development and investments in the category.
Argentina's pastries market reached a volume of 254 million tonnes in 2016, and had a market value of US$1.28 billion, according to Euromonitor.
Cookies, Crackers and Biscuits
We are present in the cookies, crackers and biscuits market through our 9 de Oro, Cukis and Paseo brands. For the sake of the following data, Euromonitor considers the aggregated "biscuits, cookies & crackers" category to include the sub-categories of savory biscuits and sweet biscuits. Our cookies, crackers and biscuits business line represented 18.4% of the net sales of our Retail Products segment for the fiscal year ended November 30, 2016.
Argentina's sweet biscuits and crackers market reached 543 thousand tonnes in 2016 after growing at a compound rate of 1.6% from 2012 to 2016. The dollar value of the market for the same year was US$2.5 billion. The following chart shows the growth of the Argentine biscuits, cookies and cracker market in terms of tonnes and volume per capita terms:
Argentine Sales of Biscuits, Cookies & Crackers | Argentine Consumption of Biscuits, Cookies & Crackers | |
Data from Euromonitor | Data from Euromonitor |
The CAGR of 1.6% for Argentine sales of biscuits, cookies and crackers for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population. Similarly, the CAGR of 2.5% in Argentine consumption of biscuits, cookies and crackers for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
The market for biscuits, cookies and crackers in other countries where we have operations vary in size. Brazil is the largest country by far at 1.3 billion tonnes sold for the year ended 2016, a figure which is almost 2.4 times the size of Argentina's market and 10.8 times the size of the third largest market, which was Chile with 120 thousand tonnes. The following table shows the evolution of market size in total volume and per capita.
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Positive market trends in wheat flour derivative products such as the sweet biscuits market exist and show steady, positive volume growth despite swings in economic activity. The following chart illustrates these regional trends in the sale of sweet biscuits:
Regional(1) Sales of Sweet Biscuits
Data from Euromonitor, IMF & INDEC
The CAGR of 1.1% for regional sales of sweet biscuits for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population. Similarly, the CAGR of 1.6% in Argentine sales of sweet biscuits for the period from 2012 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
We have a group of market-leading brands that we expect to continue to grow strongly. Net sales of our vegetable oil, flour and biscuits, crackers and cookies grew 65%, 41% and 49%, respectively, in our 2016 fiscal year from our 2015 fiscal year, in all cases at a rate which exceeded inflation for the year.
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The following chart shows the year over year growth rate in volume consumed for three of the retail food product categories in which we participate:
Source: Company information
We also benefit from a group of branded products that are still gaining market adoption and their maturing process offer significant potential for revenue and profitability growth. Sales of our frozen food product line, for example, grew 636% during the fiscal year ended November 30, 2016 from the fiscal year ended November 30, 2015. In the future, we may seek to upgrade the production our modern frozen food facility in Carlos A. Spegazzini, Argentina in order to drive additional benefits from increased scale.
Source: Company information
We have also developed strong distribution relationships with leading regional customers, including McDonald's and Cencosud. We plan to leverage on our existing partnerships with these regional customers and our low-cost production base to continue growing our business in Brazil, Chile and Bolivia. Through our Agro-Services and Sustainable Sourcing segment in Argentina, we have access to high quality and low cost inputs for our production process which, together with our operational efficiency, serve as a strong competitive advantage when pursuing growth in new markets.
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Sales of our branded industrial wheat products have also shown positive growth trends, as evidenced in the following chart:
Source: Company information
The 33.2% CAGR for Argentine wheat flour sales for the period from 2014 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
Argentina's Grain and Milling Industry
Argentina's Geographic Advantages
The country's geographic location, temperate climate, water supply, and land availability, represent competitive advantages vis-à-vis other grain producers in the region. The country's main agricultural area is known as La Pampa Humeda, located in the northwest of Argentina and comprised of the provinces of Entre Ríos, Santa Fe, Córdoba, La Pampa and Buenos Aires. The area's rich soil and flat topography enables the plantation of grain and maximizes yield. According to the Ministry of Agriculture of Argentina, the average yields in the area have historically remained between 2.4-3.1 tonnes/hectares over the last five years, above the average of 1.88 tonnes/ha for other farming areas in Argentina. The grain industry has increased its investments in crop protection to minimize losses due to pests and other issues, with the total market value of the crop protection market growing at a CAGR of 5% between 2013 and 2015. The biggest investments from farmers were in glyphosate herbicides and non-Glyphosate herbicides with a CAGR of 11% and 10% respectively from 2013 to 2015.
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Geographical proximity to major ports and to the Parana River simplifies logistical details and transportation. Approximately 65% of Argentina's grain shipments are exported through the ports of San Lorenzo, Rosario, Villa Constitución and San Nicolas de los Arroyos.
Argentina's Production and Export of Grains
Argentina is one of the most important grain producers in the world, behind only the United States, China, the European Union, and Brazil in terms of tonnes of grains produced, with soybean, corn, and wheat representing 88% of the grains produced in Argentina during the 2015/2016 harvest.
Argentina's Milling Industry
Wheat flour represents 50.2% of our Branded Industrial Products segment net sales for the fiscal year ended November 30, 2016. According to the FAIM, 5.8 million tonnes of wheat were milled in Argentina in 2016. Additionally, the country exported 0.63 million tonnes of wheat flour, its main export partners are Brazil and Bolivia, which together represented 94% of all wheat exports in 2016. Brazil was Argentina's largest export partner of wheat flour, representing 54% of all tonnes of wheat exported in 2016. Local consumption is the main use of wheat flour, supported by robust packaged food consumption in the country.
Wheat Flour Production | Wheat Flour Exports & Consumption | Wheat Flour Consumption | ||
Source: FAIM, INDEC | Source: FAIM, INDEC | Source: FAIM, INDEC |
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Argentina's Wheat Market
Wheat is the third largest crop in Argentina as it represents 9% of total local grain production or 11 million tonnes.
Wheat is used to produce flour, a fundamental ingredient in various food products such as pasta, breads, and crackers. Wheat can be processed and utilized as a livestock feed. Wheat demand is expected to increase due to rising world population and per capita consumption. An increase in population, coupled with decreasing arable land availability is expected to drive the demand for wheat. Brazil is a key trading partner for Argentina as the country represents 54% of exports in terms of tonnes produced in the country.
As for our sourcing and milling activity, we expect to continue to benefit from our network of more than 8,000 farmers that, along with certain brokers, provides us with differentiated access to high quality wheat. Argentina is the largest and most productive producer of wheat in the region and with the recent reductions in its export taxes, wheat from Argentina has improved its competitive profile globally. As a large consumer and buyer of wheat in Argentina, we believe our food production and sourcing business will continue to benefit from the improved market condition for wheat production in the country.
The following chart shows wheat production by country for the principal markets in which we operate:
Source: 2016 USDA Report
Argentina is the main supplier of wheat for Brazil, a country which has historically shown a significant deficit in wheat production despite heavy government incentives supporting local wheat production. The recent growth in wheat production from Argentina confirmed the country's role as the main supplier of wheat for the Brazilian market.
The following chart compares wheat yield per hectare in the principal markets in which we operate:
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Source: 2016 USDA Report
The following chart provides a comparison of Argentina's production surplus and Brazil's consumption deficit:
Source: 2016 USDA Report
Similarly, milling activity has shown steady growth in Argentina and the region. With our increased capacity following the Cargill Acquisition, we believe we are well positioned to continue to grow our milling production which we believe will benefit our business by ensuring increased volume and better economies of scale for our products.
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The following charts show Argentina's wheat milling production, its exports of flour and its consumption of flour for the three most recent years:
Argentina Wheat Milling Production
Source: FAIM & INDEC
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The CAGR of 0.5% for Argentine wheat milling production for the period from 2014 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
Source: FAIM & INDEC
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The CAGR of 17.3% for Argentine exports of flour for the period from 2014 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
Source: FAIM & INDEC
The CAGR of 1.5% for Argentine consumption of flour for the period from 2014 through 2016 was primarily due to a combination of marginal growth in consumption per capita and an increase in population.
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Board of Directors
Our Board of Directors is in charge of directing our business.
The following table sets forth information for the members of our Board of Directors as of the date of this prospectus and before the Global Offering, in accordance with the designation carried out at the general shareholders' meeting held on March 31, 2017:
Name
|
Occupation | Original Date of Appointment |
Current Date of Appointment |
Expiration Date |
Date of Birth |
Position | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Aldo Adriano Navilli |
Executive | December 26, 1976 | March 31, 2017 | November 30, 2017 | January 02, 1952 | President | ||||||
Carlos Adriano Navilli |
Executive | March 8, 1977 | March 31, 2017 | November 30, 2017 | February 20, 1959 | Vice President | ||||||
Mariano Navilli |
Executive | February 24, 2016 | March 31, 2017 | November 30, 2017 | April 08, 1986 | Regular Director | ||||||
Daniel Héctor Ercoli |
Executive | March 28, 2003 | March 31, 2017 | November 30, 2017 | February 17, 1959 | Regular Director | ||||||
Ricardo Alberto Navilli |
Executive | March 10, 1978 | March 31, 2017 | November 30, 2017 | October 26, 1959 | Regular Director | ||||||
Adriana Elba Navilli |
Executive | December 26, 1976 | March 31, 2017 | November 30, 2017 | December 28, 1954 | Regular Director | ||||||
Marcos Aníbal Villemur |
Executive | April 26, 2007 | March 31, 2017 | November 30, 2017 | December 18, 1978 | Regular Director | ||||||
Ricardo Leandro Navilli |
Executive | March 31, 2017 | March 31, 2017 | November 30, 2017 | July 7, 1988 | Regular Director | ||||||
Jorge Damian Schnir |
Executive | March 31, 2017 | March 31, 2017 | November 30, 2017 | August 5, 1963 | Independent Director | ||||||
Alejandro German Lemonnier |
Executive | March 31, 2017 | March 31, 2017 | November 30, 2017 | August 5, 1962 | Independent Director |
In accordance with the resolutions adopted at our April 5, 2017 general shareholders' meeting: (i) directors Aldo Adriano Navilli, Carlos Adriano Navilli, Mariano Navilli, Daniel Héctor Ercoli, Ricardo Alberto Navilli, Adriana Elba Navilli, Marcos Aníbal Villemur, Ricardo Leandro Navilli, Jorge Damian Schnir and Alejandro Germán Lemonnier resigned their positions as our regular directors; and (ii) Aldo Adriano Navilli, Carlos Adriano Navilli, Mariano Navilli, Daniel Héctor Ercoli, Ricardo Alberto Navilli, Ricardo Leandro Navilli, Adriana Elba Navilli, Marcos Aníbal Villemur, Jorge Damián Schnir and Alejandro German Lemonnier were appointed as regular directors. Pursuant to the resolutions adopted, the Board of Directors shall be comprised of 10 board members. The Directors shall hold their positions for three fiscal years, and may be reelected indefinitely; provided however that pursuant to the resolution passed at our April 5, 2017 shareholders' meeting, some of the directors conditionally appointed upon the Global Offering will serve for shorter periods in order to allow for a staggered appointment of the members to be put in place. References to our general shareholders' meeting adopting a resolution for the modifications of our bylaws and the designation of our new board of directors refer to a meeting to be held prior to the effectiveness of the Global Offering. References to our bylaws are to our bylaws as adopted upon the effectiveness of the Global Offering.
All such resolutions, including the resignations and appointments, are conditioned upon and shall be effective as from the Global Offering of the Class B ordinary shares.
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The following table sets forth information for the Board of Directors assuming office immediately after completion of the Global Offering:
Name
|
Occupation | Original Date of Appointment |
Current Date of Appointment |
Term Expiration Date | Date of Birth | Position | Committee Membership | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aldo Adriano Navilli |
Executive | December 26, 1976 | April 5, 2017 | November 30, 2018 | January 02, 1952 | President | | |||||||
Carlos Adriano Navilli |
Executive | March 8, 1977 | April 5, 2017 | November 30, 2018 | February 20, 1959 | Vice President | | |||||||
Mariano Navilli |
Executive | February 24, 2016 | April 5, 2017 | November 30, 2018 | April 08, 1986 | Regular Director | Audit | |||||||
Daniel Héctor Ercoli |
Executive | March 28, 2003 | April 5, 2017 | November 30, 2017 | February 17, 1959 | Regular Director | | |||||||
Ricardo Alberto Navilli |
Executive | March 10, 1978 | April 5, 2017 | November 30, 2019 | October 26, 1959 | Regular Director | | |||||||
Ricardo Leandro Navilli |
Executive | March 31, 2017 | April 5, 2017 | November 30, 2017 | July 7, 1988 | Regular Director | | |||||||
Adriana Elba Navilli |
Executive | December 26, 1976 | April 5, 2017 | November 30, 2017 | December 28, 1954 | Regular Director | | |||||||
Marcos Aníbal Villemur |
Executive | April 26, 2007 | April 5, 2017 | November 30, 2019 | December 18, 1978 | Regular Director | | |||||||
Jorge Damián Schnir |
Executive | March 31, 2017 | April 5, 2017 | November 30, 2019 | August 5, 1963 | Independent Director | Audit | |||||||
Alejandro German Lemonnier |
Executive | March 31, 2017 | April 5, 2017 | November 30, 2017 | August 5, 1962 | Independent Director | Audit |
In accordance with the Argentine General Companies Law and our bylaws, the Board of Directors must meet at least once every three months. A majority of board members constitutes a quorum and all the decisions must be adopted by a majority of the directors present at each meeting.
Included below is (i) a description of the main tasks currently performed by each current director, as well as a description of the respective employment history and education; and (ii) a description of the respective employment history and education of each of the directors appointed and assuming office as of the date of the Global Offering:
Aldo Adriano Navilli has served as President of our Board of Directors since 1976. He has been part of the management team and one of our shareholders since 1973. Mr. Navilli has extensive experience in the milling and sourcing industries and, since 1973, has also served in the management and boards of several of our affiliates and subsidiaries including Cañuelas Pack S.A. and Molinos Florencia S.A. Mr. Navilli has lead our development and those of the businesses we incorporated into and has been a key factor for our growth since our founding. Mr. Navilli holds a master's degree in business management from IEA Business School. Besides being a member of our Board of Directors, he is a member of the following boards of directors: 9 de Oro S.A., Administración Country S.A., Cañuelas Golf Club S.A., Grupo Cañuelas S.A., La Sarita del
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Norte S.A., Molca S.A., Molinos Puntanos S.A., Pureza S.A., Santa Cecilia Del Oeste S.A., Selene S.A.C.F.I.I. y A., Aldo Navilli y Hno. S.A., Neuhuel S.A., Puramel S.A., VIU S.A., Zarex S.A., Alimentos Cañuelas S.A., Cañuelas S.A., VBA S.A., Cañuelas Pack S.A., Molino Americano S.A., Molinos Florencia S.A., Fundación San Ignacio de Loyola and Fundación Molino Cañuelas.
Carlos Adriano Navilli has served as Vice President of our Board of Directors since 1977. He is currently involved in the management of several of our subsidiaries and affiliates. He has over 40 years of experience and knowledge in the milling industry, mainly in the commercial and export areas. He is principally engaged in managing and directing various operations and is also involved in other business activities in the sector. Besides being a member of our Board of Directors, he is a member of the following boards of directors: 9 de Oro S.A., Administración Country S.A., Cañuelas Golf Club S.A., Grupo Cañuelas S.A., Molca S.A., Molinos Puntanos S.A., Pureza S.A., Santa Cecilia Del Oeste S.A., Selene S.A.C.F.I.I. y A., Cañuelas Pack S.A., Molino Americano S.A., Molinos Florencia S.A., Fundación San Ignacio de Loyola, Fundación Molino Cañuelas, Finexcor S.R.L., Southern Multinvest; Compañía Argentina de Granos S.A., Meats S.R.L., Agronegocios Las Mercedes S.A., Agrotorino S.A., Alimentos Cañuelas S.A., Santa Paz S.A., Moinho Canuelas Ltda., Cañuelas S.A., Megaseed S.A., Transporte Laboulaye S.A., La Adriana S.A., Nadez S.A., Marniflor S.A., Flormoli S.A., Sociedad Privada de Inversiones and Bartony and Cooley International Inc.
Mariano Navilli has served as a member of our Board of Director since 2016. He has served as manager in several of our subsidiaries and affiliates, including Moinho Cañuelas S.A. and Molino Americano S.A. Mr. Navilli has 13 years of experience as one of our executives and has developed extensive experience in food branded products and retail business, especially with respect to industrial processes. His principal business activities consist of managing and directing various of our plants and operations. Mr. Navilli holds a Bachelor's degree in Business Administration from the Universidad Católica de Argentina. Besides being a member of our Board of Directors, he is a member of the following boards of directors: Administración Country S.A., Cañuelas Pack S.A. Cañuelas Golf Club S.A., La Sarita del Norte S.A., Aldo Navilli y Hno. S.A., Neuhuel S.A., Puramel S.A., VIU S.A., Zarex S.A., Alimentos Cañuelas S.A., Cañuelas Pack S.A., Molino Americano S.A., Ciser Cañuelas S.A., Moinho Canuelas Ltda., Aluma Explotaciones Inmobiliaria S.A., Relumar Inversiones S.A. and Fundación San Ignacio de Loyola.
Daniel Hector Ercoli has served as a member of our Board of Directors since 2003. Since the 1990s, he has also served as one of our executive officers. Prior to this and beginning in 1989, he became General Manager of Molinos Adelia María S.A. and served in a variety of different administrative roles at Molinos Florencia S.A. beginning in November 1, 1978, where he also served as General Manager. From 2003 through June of 2016, Mr. Ercoli also served as vice president of FAIM. In addition to his role as a member of our Board of Directors, Mr. Ercoli currently serves as our Branded Industrial Manager. Mr. Ercoli holds a degree in corporate management from the Intensive Program in Executive Development of IADE. Besides being a member of our Board of Directors, he is a member of the following boards of directors: Molino Cañuelas S.A.C.F.I.A, Compañía Argentina de Granos, Ciser Cañuelas, Federación Argentina de la Industria molinera, Santa Paz S.A. and Cañuelas Golf Club S.A.
Ricardo Alberto Navilli has served as a member of our Board of Directors since 1978. Mr. Navilli has 39 years of experience and extensive knowledge in the milling industry, mainly in the areas of industrial milling, as a result of his experience working in our organization. Mr. Navilli's principal business activities consist of acting as a director for Molino Cañuelas and working in the management of several of our operations and businesses. Besides being a member of our Board of Directors, he is a member of the following boards of directors: 9 de Oro S.A., Administración Country S.A., Cañuelas Golf Club S.A., Grupo Cañuelas S.A., Molca S.A., Molinos Puntanos S.A.,
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Pureza S.A., Santa Cecilia Del Oeste S.A., Selene S.A.C.F.I.I. y A., Alimentos Cañuelas S.A., Cañuelas S.A., , Cañuelas Pack S.A., Molino Americano S.A., Molinos Florencia S.A., Fundación San Ignacio de Loyola, Fundación Molino Cañuelas, Finexcor S.R.L., Southern Multinvest S.R.L., Meats S.R.L., Haras Aniceto S.A., Santa Paz S.A., Moinho Canuelas Ltda., Megaseed S.A., Transporte Laboulaye S.A., Agro Yet S.A., Rifravial S.A., and Nidan S.A.
Adriana Elba Navilli has served as a member of our Board of Directors since 1976. She has also served as a member of the board of directors for several of our subsidiaries and affiliates. She has over 35 years of experience serving on boards of directors from our subsidiaries and affiliates. Her principal business activities consist of acting as a director for Molino Cañuelas and working in the management of several of our operations and businesses. Besides being a member of our Board of Directors, she is a member of the following boards of directors: 9 de Oro S.A.; Administracion Country S.A.; Cañuelas Golf Club S.A.; Grupo Cañuelas S.A.; Molca S.A.; Pureza S.A.; Santa Cecilia del Oeste S.A.; Cañuelas Pack S.A.; Molino Americano S.A.; Molino Florencia S.A.; Agrotorino; Selene S.A.C.F.I.I. y A.; Agronegocios Las Mercedes S.A.; Transporte Laboulaye S.A.; La Adriana S.A.; Flormoli S.A.; Marniflor S.A.; Artisans S.A.; Alimentos Cañuelas S.A.; Bartony and Cooley International Inc.; Molinos Puntanos S.A.; Cañuelas S.A.; Fundacion San Ignacio de Loyola; Fundacion Molino Cañuelas; Megaseed S.A.; and Molino Cañuelas S.A.
Marcos Aníbal Villemur has served as a member of our Board of Directors since 2007. Mr. Villemur has over 16 years of experience serving in executive positions at Molino Folrencia S.A. and is also a member of various boards of our subsidiaries and affiliates. His principal business activities consist of acting as a director for Molino Cañuelas and working in the management of several of our operations and businesses. Mr. Villemur holds a degree in Business Administration from the Universidad Católica de Córdoba. Besides being a member of our Board of Directors, he has directorships in the following corporate boards: 9 de Oro S.A.; Cañuelas Golf Club S.A.; Grupo Cañuelas S.A.; Molca S.A.; Pureza S.A.; Santa Cecilia del Oeste S.A.; Cañuelas Pack S.A.; Molino Americano S.A.; Molinos Florencia S.A.; Compañía Argentina de Granos S.A.; Agrotorino S.A.; Agronegocios Las Mercedes S.A.; Selene S.A.C.F.I.I. y A.; Transporte Laboulaye S.A.; Artisans S.A.; Flormoli S.A.; La Adriana S.A.; Molinos Puntanos S.A.; Administración Country S.A.; Fundacion San Ignacio de Loyola S.A.; Fundacion Molino Cañuelas S.A.; Megaseed S.A.; Alimentos Cañuelas S.A.; and Marniflor S.A.
Jorge Damián Schnir has served as a member of our Board of Directors since 2017. Prior to serving as a member of our Board of Directors, Mr. Schnir served for eight years as the Internal Corporate Auditor for Arcos Dorados, McDonald´s master franchisee for Latin America, where he served as Internal Corporate Auditor for eight years. Prior to his time in Arcos Dorados, Mr. Schnir worked for the ExxonMobil Corporation for fifteen years. Mr. Schnir's principal business activities currently consist of independent consulting for businesses. Mr. Schnir holds a Business Administration degree from University of Buenos Aires. Besides being a member of our Board of Directors, he has no other current directorships.
Ricardo Leandro Navilli has served as a member of our Board of Directors since 2016. Since 2014, Mr. Navilli has been working in the planning and execution of our regional growth strategy. Prior to serving in his current role, Mr. Navilli worked in various managerial positions beginning in 2012, where he gained experience in project development, export management and business unit management. His principal business activities consist of acting as a director for our Company and working in the management of several of our operations and businesses. Mr. Navilli has a degree in business administration and has undertaken additional coursework in corporate risk management at IAE Business school and grain purchase strategy at Kansas State University IGP. Besides being a member of our Board of Directors, he is a director in Haras Aniceto S.A.
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Alejandro German Lemonnier has served as a member of our Board of Directors since 2017. Previously, he served for twenty two years as CFO and Board member for Arcos Dorados before he was responsible of accounting, tax & finance matters, strategic planning and all the relation with the SEC. Mr. Lemonnier has more than 30 years of experience in corporate finance and external audit, including eight years with Coopers & Lybrand, today PricewaterhouseCoopers. Mr. Lemonnier's principal business activities consist of corporate and personal advisory services, certain entrepreneurship activities, managing start up investments and other related activities. Mr. Lemonnier holds a CPA degree from University of Buenos Aires and postgraduate studies from IAE. He also has directorships in the following boards: Arcos Dorados Holdings Inc. and Freddo S.A.
With respect to the Board of Directors members assuming office immediately after completion of the Global Offering, Aldo Adriano Navilli, Carlos Adriano Navilli, Mariano Navilli, Daniel Héctor Ercoli, Ricardo Alberto Navilli, Ricardo Leandro Navilli, Adriana Elba Navilli and Marcos Aníbal Villemur shall be considered non-independent and Jorge Damián Schnir and Alejandro German Lemonnier shall be considered independent under the SEC requirements.
Aldo Adriano Navilli, Carlos Adriano Navilli, Mariano Navilli, Daniel Héctor Ercoli, Ricardo Leandro Navilli, Adriana Elba Navilli and Marcos Aníbal Villemur are domiciled at the registered office of the Company, which is located at John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina.
Jorge Damián Schnir is domiciled at Bulnes 2659 5D. CP1425, Buenos Aires, Argentina.
Alejandro German Lemonnier is domiciled at Av. Roque Saenz Peña 995 9no A. C1035AAE, Buenos Aires, Argentina.
Duties and Obligations of Directors
Under the Argentine General Companies Law, directors have an obligation to perform their duties with the loyalty and the diligence of a prudent business person. Under Section 274 of the Argentine General Companies Law, directors are jointly and severally liable to the company, the shareholders and third parties for the improper performance of their duties, for violating any law or the bylaws or regulations of the company, if any, and for any damage to these parties caused by willful misconduct, abuse of authority or gross negligence. The following, among others, are considered integral to a director's duty of loyalty:
In general, a director will not be held liable for a decision of the Board of Directors, even if that director participated in the decision or had knowledge of the decision, if (i) there is written evidence of the director's opposition to the decision and (ii) the director notifies the Supervisory Committee of his opposition. However, both conditions must be satisfied before a particular director is no longer liable
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vis-à-vis the Board of Directors, the supervisory committee, the shareholders, the relevant Argentine authority or the commercial courts of Argentina.
Section 271 of the Argentine General Companies Law allows directors to enter into agreements with the company that relate to such company's activity and are made under arms-length conditions. Agreements that do not satisfy any of the foregoing conditions must have prior approval of the Board of Directors (or the supervisory committee in the absence of board quorum), and must be notified to the shareholders at a shareholders' meeting. If the shareholders reject the agreement, the directors or the members of the supervisory committee, as the case may be, shall be jointly and severally liable for any damages to the company that may result from such agreement. Agreements that do not satisfy the conditions described above and are rejected by the shareholders are null and void, without prejudice to the liability of the directors or members of the supervisory committee for any damages to the company.
The acts or agreements that a company enters into with a related party involving a "relevant amount" should fulfill the requirements set forth in Sections 72 and 73 of the Argentine Capital Markets Law. Under Section 72 of such law, the directors and members of senior management and the supervisory committee (as well as their ancestors, descendants, spouses, siblings or sisters and the companies in which any of such persons may have a direct or indirect ownership interest) among others are deemed to be a related party. A relevant amount is defined as an amount which exceeds 1% of the net worth of the company as per the latest balance sheet. The Board of Directors or any of its members shall require from the audit committee a report stating whether or not the terms of the transaction may reasonably be considered adequate in relation to normal market conditions. The company may also choose to make this determination by relying on a report of two independent valuation firms that shall have reported on the same matter and about the other terms of the transaction. The Board of Directors shall make available to the shareholders the report of the audit committee or of the independent valuation firms, as the case may be, at the main office on the business day after the board's resolution was adopted and shall communicate such fact to the shareholders of the company in a corresponding market bulletin. The vote of each director shall be recorded in the minutes of the Board of Directors approving the transaction. The transaction shall be submitted for the approval of the shareholders of the company if the audit committee or both valuation firms have not considered the terms of the transaction to be reasonably adequate in relation to normal market conditions. In the event that a shareholder demands compensation for damages caused by a violation of Section 73 of the Argentine Capital Markets Law, the burden of proof is placed on the defendant to show that the act or agreement was in accordance to the market conditions or that the transaction did not cause any damage to the company. The approval will not allow the burden of proof to be shifted by the Board of Directors with the favorable opinion of the audit committee or the two valuation firms.
Pursuant to Section 276 of the Argentine General Companies Law, we may initiate causes of action against directors if so decided at a meeting of the shareholders. If a cause of action has not been initiated within three months of a shareholders' resolution approving its initiation, any shareholder may start the action on behalf of, and on the company's account. A cause of action against the directors may also be initiated by shareholders who object to the approval of the performance of such directors if such shareholders represent, individually or in the aggregate, at least 5% of the company's capital stock.
Pursuant to Section 275 of the Argentine General Companies Law, except in the event of our mandatory liquidation or bankruptcy, shareholder approval of a director's performance, or the express waiver or settlement approved by a meeting of the shareholders, terminates any liability of a director vis-à-vis the company, provided that shareholders representing at least 5% of the company's capital stock do not object and provided further that such liability does not result from a violation of law or the company's bylaws.
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Under Argentine law, the Board of Directors is in charge of the company's management and administration and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the Argentine General Companies Law, the company's bylaws and other applicable regulations. Furthermore, the Board of Directors is generally responsible for the execution of the resolutions passed in a shareholders' meetings and for the performance of any particular task expressly delegated by the shareholders.
Appointments, Meetings, Quorum, Majorities
The Board of Directors shall meet at least once every three months and its meetings shall be considered valid only with the presence of an absolute majority of its members. Resolutions will be adopted with a vote by the majority of those present. According to our bylaws, in case of a tie, the Chairman of the Board of Directors or the Vice-Chairman replacing the Chairman shall have the deciding vote.
In case the shareholders' meeting sets forth that the Board of Directors shall be composed by seven or more regular members but less than nine members (i) such appointed members shall remain in office for two years; and (ii) half of the board will be up for election on each successive year.
In case the shareholders' meeting sets forth that the Board of Directors shall be composed by nine or more members (i) each appointed members shall remain in office for three years; and (ii) every year a third of all members will be appointed.
Executive Officers
The following table shows certain information with respect to our executive officers as of the date of this prospectus:
Name
|
Position | Year Employed | Date of Birth |
|||
---|---|---|---|---|---|---|
Aldo Adriano Navilli |
CEO | 1976 | January 02, 1952 | |||
Alejandro Matoso |
Chief Financial Officer | 2017 | December 8, 1975 | |||
Cristian Alejandro Cotone |
Chief Accounting Officer | 2008 | November 7, 1974 | |||
Juan Manuel Gonzalez Capra |
General Counsel | 2008 | September 18, 1975 | |||
Aldo Luciano Navilli |
Chief Strategy Officer | 2009 | February 2, 1991 | |||
Marcelo Gaitán |
Agro-Services and Sustainable Supply Director | 1995 | January 16, 1969 | |||
Daniel Hector Ercoli |
Branded Industrial Food Director | 1978 | February 17, 1959 | |||
Juan J. Rodriguez Nouche |
Retail Director | 2016 | March 27, 1966 | |||
Ricardo Souza |
Latin American Director | 2017 | February 20, 1964 | |||
Graciela Monica Rastelli |
Commercial Director | 1998 | April 7, 1972 |
|||
Enrique Ruben Perez |
Purchasing Director | 1983 | September 10, 1961 |
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Included below is a description of the employment history, experience and main tasks currently performed by each executive officer:
Aldo Adriano Navilli serves as our CEO. For further information see "ManagementBoard of DirectorsAldo Adriano Navilli".
Alejandro Matoso has served as our Chief Financial Officer since February, 2017. Mr. Matoso has 18 years of experience in corporate finance and capital markets, including twelve years as an investment banker in New York City. Prior to serving as Chief Financial Officer, Mr. Matoso was a Managing Director in the investment banking division of Morgan Stanley in New York where he advised corporate customers on capital raising and mergers and acquisitions. Prior to Morgan Stanley, Alejandro worked as an investment banker at UBS Investment Bank and as a finance professional at Ford Motor Company. Mr. Matoso holds an Industrial Engineering degree from University of Buenos Aires and an MBA with High Distinction from the Ross School of Business at the University of Michigan. He is also a Chartered Financial Analyst (CFA).
Cristian Alejandro Cotone has served as our Chief Accounting Officer since 2017. Prior to this, he served as our Chief Financial Officer from 2014 through 2016. Mr. Cotone has over 10 years of experience in finance and accounting matters. Prior to serving as Chief Accounting Officer, Mr. Cotone was the head management of our subsidiary Cañuelas Chile S.A. from 2012 through 2014 and was the head of our internal auditing division from 2008 through 2012. Mr. Cotone has experience in corporate finance and capital markets. Mr. Cotone has also represented us before international financial institutions and banks, including IFC in connection with our negotiation of the IFC Facility. Mr. Cotone is a public accountant and received his degree in 2001 from the University of Buenos Aires.
Juan Manuel Gonzalez Capra has served as General Counsel to Molino Cañuelas since 2008. He holds a law degree from Blas Pascal in Córdoba and a specialization in tax from Universidad Austral in Buenos Aires. Prior to serving as General Counsel, Mr. Gonzalez Capra specialized in tax litigation and served as the manager of the tax litigation department of PricewaterhouseCoopers from 2001 through 2008. Prior to working at PwC, Mr. Gonzalez Capra worked for the Ministry of Justice of the Province of Córdoba and subsequently for various law firms where he obtained extensive training and experience as a corporate attorney.
Aldo Luciano Navilli has served as our Chief Strategy Officer since 2016. Mr. Navilli has worked for our organization since 2009. Prior to serving as a Chief Strategy Officer, Mr. Navilli served in various positions in our organization where he developed experience in agroservices and sustainable sourcing, and our operations in general. Mr. Navilli holds an Industrial Engineering degree and has completed additional studies in capital markets from the University of CEMA as well as courses in Agribusiness at Harvard Business School.
Daniel Hector Ercoli see "Board of DirectorsDaniel Hector Ercoli". In addition to his role as a member of our Board of Directors, Mr. Ercoli currently serves as our Branded Industrial Food Director.
Marcelo Gaitán has served as our Agro-Services and Sustainable Supply director since 2017. Mr. Gaitán has over 22 years of experience in the agricultural industry. Prior to serving as our Agro-Services and Sustainable Supply director, Mr. Gaitán worked in the new business development unit of Compañía Argentina de Granos S.A. Prior to this, Mr. Gaitán worked in the finance, tax and cost management divisions of Compañía Argentina de Granos S.A. from 1995 to 2016. Mr. Gaitán has been with our organization since February of 1995. Mr. Gaitán is a public accountant who received his degree from Universidad Nacional de Cordoba in 1992.
Juan J. Rodriguez Nouche has served as our Retail Director since 2016. Mr. Nouche has over 15 years of experience in retail food products. Prior to serving as our Retail Director, Mr. Nouche
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served as Director General of Grupo Arcor from 2013 to 2015. Prior to serving as Director General, Mr. Nouche served in various capacities at Grupo Arcor including General Manager for International Business from 2008 through 2012, General Manager for New Business from 2004 to 2007, and General Manager for Snack Foods from 2000 to 2003. Mr. Nouche holds a degree in accounting from the University of Buenos Aires and a Masters in Business Management from CEMA.
Ricardo Souza has served as our Latin American Director since 2017. Before becoming our Latin American Director, Mr. Souza worked as Executive Director for Cañuelas Brazil from 2016 through 2017. Prior to serving as Executive Director, he worked for companies that are part of the group of companies owned by the principal shareholders as an auditor for seven years, as a managing controller from 2011 to 2013 and a business manager from 2014 to 2016. Ricardo has extensive experience in supporting board of directors providing important information to decision making and strategic planning.
Graciela Monica Rastelli has served as our Commercial Director since 2014. She has extensive experience in the agro-food sector, mainly within the areas of commercial divisions and new business ventures. Her experience has focused on the development and implementation of commercial strategy for mass consumer businesses. Prior to serving as our Director of Commercial Activity and New Ventures, Mrs. Rastelli has served as commercial director and new business from April 2011 through November 2014, manager of commercial mass consumer businesses from May 2007 to March 2011, supermarket sales chain manager from October 2004 through April 2007 and the manager of our private label operations from October 1998 through 2004. She received her Bachelor's Degree in Food Technology in 1995 from the Pontifical Catholic University of Argentina (UCA) with Honors, a Postgraduate Specialization in Marketing from the University of San Andrés (UdeSA) in 1999 and a Master's Degree in Marketing from UdeSA in 2003. Prior to joining us, Ms. Rastelli worked as a key accounts manager for Special Accounts at Molinos Río de la Plata S.A. from December 1996 to 1998.
Enrique Ruben Perez has served as our Purchasing Manager since 1983. Mr. Perez has over 30 years of experience with the company holding a number of different positions, including as head of Cañuelas Pack.
Our managers supervise our day-to-day operations so as to ensure that all of our general strategic objectives are carried out and they report to our Board of Directors.
All senior managers are domiciled at the registered office of the Company, which is located at John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina.
Supervisory Committee
As of the date of this prospectus, in accordance with the designation carried out at the general shareholders' meeting held on February 24, 2016, Marcelo Oscar Scherrer acts as regular syndic and Adriana Elizabeth Clemente acts as alternate syndic.
However, pursuant to the Argentine General Companies Law, the Argentine Capital Markets Law and the CNV rules, we are required to establish a supervisory committee (comisión fiscalizadora) composed only of lawyers, certified public accountants authorized to practice in Argentina and/or civil-law partnerships whose members are either lawyers or certified public accountants authorized to practice in Argentina. Thus, in accordance with the resolutions adopted at our April 5, 2017 general shareholders' meeting, our supervisory committee was created and is separate from the committees of the Board of Directors. The supervisory committee shall be composed of three regular members and three alternate members, none of whom are members of our Board of Directors. Both the regular members as well as the alternate members of the supervisory committee shall be appointed at a
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shareholders' meeting for a one-year term. Under Section 248 of the Argentine General Companies Law, plurality of votes will not be applicable to the election of members of the supervisory committee.
Upon completion of the Global Offering and further to the resolution of the general shareholders, both Marcelo Oscar Scherrer and Adriana Elizabeth Clemente resigned to their positions as syndics, and a supervisory committee consisting of three regular and three alternate syndics was created. Marcelo Oscar Scherrer, Leonardo Fernandez and Facundo Clodomiro Carranza were appointed as regular members of the supervisory committee, and Fabian Cainzos, Maria Mercedes Premrou, and Francisco Antognini were appointed as alternate members of the supervisory committee. The term of the supervisory committees' appointees shall be until the end of the current fiscal year, November 30, 2017.
The principal rights and duties of the members of the supervisory committee under Argentine General Companies Law are: (1) to review corporate management by examining accounts and documents; (2) to verify, at the same time and frequency, amount of securities on hand and compliance with obligations; (3) to attend, without voting, the annual shareholders' meetings and meetings of the Board of Directors; (4) to summon extraordinary shareholders' meetings, if deemed necessary, and regular and special shareholders' meetings should the Board of Directors not summon them; (5) to submit to the shareholders' meetings a written report regarding the economic and financial condition of the company and to render an opinion about the report, the balance sheet and the income statements of the company and (6) to analyze the written claims of shareholders representing no less than 2% of the outstanding capital stock. When conducting these activities, the supervisory committee is prohibited from controlling the operations and from assessing the fairness of the decisions made by directors. The supervisory committee has unlimited access to corporate documents and other documents and accounts and it has the right to solicit any information that it deems necessary in order to perform its duties.
Below is a brief account of the business experience of the regular members and alternate members of our supervisory committee:
Francisco Antognini is a Public Accountant with a degree from Universidad Católica Argentina. Mr. Antognini has vast experience in advising and auditing, advising and being part of the Audit Department for companies such as Telefónica, Claro, Editorial Atlántida, Cablevisión and Dreyfus, between others. He became partner in tax in Ernst & Young, and occupied such position until his retirement in 2013. He was professor of the tax module in Universidad Católica Argentina and in the Finance postgraduate degree offered by the UADE, and gave several lectures and conferences. As of the date of this prospectus, he has been appointed as alternate member of the supervisory committee of the Company.
Leonardo Fernandez is a lawyer with a degree from Universidad de Buenos Aires, and has completed several postgraduate courses. He is director of IRSA Propiedades Comerciales and alternate Director of Transportadora de Gas del Norte S.A. As of the date of this prospectus, he has been appointed as regular member of the supervisory committee of the Company.
Marcelo Oscar Scherrer is a Public Accountant with a degree from Universidad Nacional de Río Cuarto. He is a syndic of Meats S.R.L., Finexclor S.R.L., Molisur S.A. and Southern Multinvest. Mr. Sherrer has experience in the areas of accountancy, tax and audit. Since 1997 he is a syndic of the Company. As of the date of this prospectus, he has been appointed as regular member of the supervisory committee of the Company.
Fabian Cainzos is a lawyer with a degree from Universidad de Buenos Aires. As of the date of this prospectus, he has been appointed as alternate member of the supervisory committee of the Company.
Maria Mercedes Premrou is a lawyer with a degree from Universidad Católica Argentina, and has completed postgraduate courses. As of the date of this prospectus, she has been appointed as alternate member of the supervisory committee of the Company.
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Facundo Clodomiro Carranza is a lawyer with a degree from Universidad Nacional de Córdoba, and has completed several postgraduate courses in the Universidad Nacional del Litoral, Universidad Nacional de Córdoba and Universidad Católica de Córdoba. Mr. Carranza has vast experience in civil and commercial law. From 2009 to 2013, he served as President of the Bar Association of Río Cuarto. As of the date of this prospectus, he has been appointed as regular member of the supervisory committee of the Company.
Pursuant to the first paragraph of Section 79 of the Argentine Capital Markets Law, all members of the supervisory committee should be independent.
Pursuant to Section 12, Chapter III, Title II of the CNV Rules, the independence of the auditors will be evaluated considering the guidelines provided by the Technical Resolutions of the FACPCE. According to the provisions of Technical Resolution No. 15 of the Federación Argentina de Consejos Profesionales de Ciencias Económicas, all members of our supervisory committee are independent.
Family Relationships
As of the date of this prospectus, the following family relationships existed among our executive officers and the members of our Board of Directors:
There are no other family relationships among our executive officers and the members of our Board of Directors.
Compensation Policies
In the fiscal year ended November 30, 2014, 2015 and 2016, we paid AR$46.1 million, AR$31.1 million, and AR$154 million, respectively, in compensation to our key management personnel.
Executive Officers
The compensation of our executive officers requires the approval of our Board of Directors.
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Board of Directors
Under the Argentine General Companies Law, if the compensation of the members of the board of directors is not established in the bylaws of the company, it should be determined by a meeting of the Company's shareholders. The maximum amount of total compensation to the members of the board of directors and the members of the Oversight Committee (Consejo de Vigilancia), including wages and compensation for technical or administrative permanent activities, cannot exceed 25% of the company's net income. According to Section 261 of the Argentine General Companies Law, the compensation paid to all directors and members of the Oversight Committee during a given year may not exceed 5% of the company's net income for such year when there is no distribution of dividends to shareholders. If dividends are paid, such payments to directors and members of the Oversight Committee will be increased proportionally up to the aforementioned 25% of the Company's net income.
When one or more directors perform special commissions or technical or administrative activities, and there are no earnings to distribute, or they are reduced, the shareholders' meeting may approve compensation in excess of the limits described above.
The full amount of compensation paid to Directors for the fiscal year ended November 30, 2015 was AR$136 million. The remuneration for members of our Board of Directors for the fiscal year ended November 30, 2016 will be determined by the shareholders at our shareholders' meeting expected to be held in , 2017.
Supervisory Committee
The full amount of compensation paid to supervisory committee members for the fiscal year ended November 30, 2015 was AR$182,000. The remuneration for members of this committee for the fiscal year ended November 30, 2016 will be determined by the shareholders at our shareholders' meeting expected to be held in , 2017.
Long-Term Incentive Plan
We are currently developing an incentive plan to attract and retain qualified and capable professionals and to promote the success of our business. The plan will be aimed at rewarding certain employees, managers and/or directors through an annual award that may consist of stock options, restricted shares, restricted share units, share appreciation rights, performance awards, phantom stock and other awards as will be determined by our shareholders and/or Board of Directors, as applicable. As of the date of this prospectus, we have not granted any awards and no incentive plan has been yet approved or implemented.
Benefits upon Termination of Employment
Neither we nor our subsidiaries have entered into any agreement providing for benefits to any director upon termination of service.
Share Ownership
Following the Global Offering, the members of our Board of Directors will hold, as a group, % of the total interests, of Molino Cañuelas.
The following table sets forth information with respect to the beneficial ownership of our Class A and/or Class B ordinary shares, as of the date of the Global Offering, and as adjusted to reflect the conversion of our Class A shares to Class B ordinary shares and the subsequent sale of the Class B
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ordinary shares offered in this offering for each of our directors, executive officers and members of the supervisory committee who beneficially own our ordinary shares:
|
Ordinary Shares Beneficially Owned | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Class A Ordinary Shares |
Percent | Class B Ordinary Shares |
Percent | |||||||||
Directors |
|||||||||||||
Aldo Adriano Navilli |
|||||||||||||
Carlos Adriano Navilli |
|||||||||||||
Ricardo Alberto Navilli |
|||||||||||||
Adriana Elba Navilli |
|||||||||||||
Marcos Aníbal Villemur |
|||||||||||||
Total |
Corporate Governance Practices
Companies listed on the NYSE must comply with certain corporate governance standards provided under Section 303A of the NYSE Listed Company Manual. NYSE listed companies that are foreign private issuers are permitted to follow home country practices in lieu of Section 303A, except that such companies are required to comply with Sections 303A.06, 303A.11 and 303A.12(b) and (c) of the NYSE Listed Company Manual. Under Section 303A.06, foreign private issuers must have an audit committee that meets the independence requirements of Rule 10A-3 under the Exchange Act. Under Section 303A.11, such companies must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards. Finally, under Section 303A.12(b) and (c), such companies must promptly notify the NYSE in writing after becoming aware of any non-compliance with any applicable provisions of this Section 303A and must annually make a written affirmation to the NYSE.
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The table below briefly describes the significant differences between our domestic practice and the NYSE corporate governance rules:
Section
|
NYSE Corporate Governance Rules for U.S. Domestic Issuers | Argentine Corporate Governance Rules | ||
---|---|---|---|---|
303A.01 | A listed company must have a majority of independent directors. "Controlled companies" are not required to comply with this requirement. | Neither Argentine law nor do our bylaws require us to have a majority of independent directors. | ||
303A.02 |
No director qualifies as "independent" unless the Board of Directors affirmatively determines that the director has no material relationship with the listed company (whether directly or as a partner, shareholder, or officer of an organization that has a relationship with the company), and emphasizes that the concern is independence from management. The board is also required, on a case by case basis, to express an opinion with regard to the independence or lack of independence, of each individual director. |
a) a member of management or an employee of shareholders who hold material holdings in the listed company or of other entities in which these shareholders have material
holdings or over which these shareholders exercise a material influence; b) is currently an employee or has, in the last three years, been an employee of the listed company; c) a person who has a professional relationship or is part of a company or professional association that maintains professional relationship with, or that receives
remunerations or fees (other than directors' fees) from, the listed company or from shareholders that have material holdings in the listed company, or with a company in which such shareholders have material holdings or exercise a material
influence; d) a person who has material holdings in the listed company or in an entity that has material holdings in, or exercises a material influence over, the listed company; |
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Section
|
NYSE Corporate Governance Rules for U.S. Domestic Issuers | Argentine Corporate Governance Rules | ||
---|---|---|---|---|
e) a person who directly or indirectly provides goods or services to the listed company or to shareholders that have material holdings in or exercise a material influence
over the listed company and receives any compensation for such services that is substantially higher than that which is received as director of the listed company; or f) the member is married or is a family member to an individual who would not qualify as independent. |
||||
303A.03 |
The non-management directors of a listed company must meet at regularly scheduled executive sessions without management. |
The Argentine General Companies Law provides, however, that the board shall meet at least once every three months, and according to our bylaws, whenever any of the members of the Supervisory Committee or the Board of Directors considers necessary to convene a meeting. |
||
303A.04 |
A listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. Controlled companies are not required to comply with this requirement. |
Directors are both nominated and appointed by the shareholders. Notwithstanding the above, we have a Nomination and Compensation Committee which shall be integrated by at least one independent director. The committee's chairman shall be an independent director as well. |
228
Section
|
NYSE Corporate Governance Rules for U.S. Domestic Issuers | Argentine Corporate Governance Rules | ||
---|---|---|---|---|
303A.05 | A listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. Controlled companies" are not required to comply with this requirement. |
Neither Argentine law nor our bylaws require the establishment of a compensation committee. The compensation of our directors is determined at the annual ordinary shareholders' meeting. Additionally, the audit committee must issue an opinion regarding the reasonableness and adequacy of such compensation. Notwithstanding the above, we have a Nomination and Compensation Committee which shall be integrated by at least one independent director. The committee's chairman shall be an independent director as well. |
||
303A.06 |
A listed company must have an audit committee with a minimum of three independent directors who satisfy the independence requirements of Rule 10A-3, with a written charter that covers certain minimum specified duties. As a foreign private issuer, we are required to comply with Section 303A.06 of the NYSE Listed Company Manual. |
The responsibilities of an audit committee, as provided in Argentine Capital Markets Law and the CNV Rules include the responsibilities listed under "Audit Committee". |
||
303A.08 |
Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions set forth in the NYSE rules. |
The basic terms of the equity-compensation plans should be considered by the general shareholders' meeting, notwithstanding the power of this corporate body to delegate any decisions to the board of directors. |
||
303A.09 |
A listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects. |
Neither Argentine law nor our bylaws require the adoption or disclosure of corporate governance guidelines. The CNV Rules contain a recommended guidelines referred to as Code of Corporate Governance for listed companies, and the board of directors must describe on its annual report, the degree of compliance of the guidelines and recommendations included in such code. As of April 5, 2017, we have adopted a corporate governance manual. |
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Section
|
NYSE Corporate Governance Rules for U.S. Domestic Issuers | Argentine Corporate Governance Rules | ||
---|---|---|---|---|
303A.10 | A listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. | Neither Argentine law nor our bylaws require the adoption or disclosure of a code of business conduct. However, among its other responsibilities our Corporate Governance Committee must prepare a draft ethics code that will be binding upon us and all of our employees. Such code must be approved by the board of directors. | ||
303A.12 |
b) Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any noncompliance with any applicable provisions of this Section 303A. c) Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation as and when required by the interim Written Affirmation form specified by the NYSE. As a foreign private issuer, we are required to comply with Section 303A.12 of the NYSE Listed Company Manual. |
The CNV Rules provide that each year the board of directors shall include in the annual report included in the financial statement, a report on the degree of compliance with the code of corporate governance for listed companies included in the CNV Rules. In such report, which shall be submitted to the CNV and published for the general public, the board of directors must: (i) inform if it fully complies with the guidelines and recommendations of the aforementioned code of corporate governance; or (ii) explain the reasons for which it complies only partially or it does not comply with such principles and recommendations, and indicate if the company intends to incorporate the principles and guidelines it failed to adopt. To such end, the company must (a) adopt the principles as general corporate governance guidelines and the recommendations as a framework to adopt the principles within the company; (b) notify compliance with each of the recommendations included in the Corporate Governance Manual; (c) in case of compliance include the required information in accordance with CNV Rules; and (d) in case of partial or non-compliance, justify such event and indicate the action plan for future years, or an indication of the reasons for which the board of directors does not consider appropriate or applicable to follow the recommendations and guidelines provided in the CNV Rules. |
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Board of Directors Committee
Management Committee
The management committee shall be comprised of the directors and/or managers appointed by the Board of Directors. The main functions of the Management Committee are, among others, the following:
Our Board of Directors adopted, as of April 5, 2017, a corporate governance manual providing the relevant provisions regarding functions and composition of the Management Committee. Following completion of the Global Offering, such manual shall be available on the CNV's website (www.cnv.gov.ar) under the item Financial Information (Información Financiera).
Audit Committee
Under the SEC rules applicable to corporate governance, we are required to maintain an audit committee, each of whom is financially literate and one of whom has accounting or related financial management expertise.
Pursuant to our shareholders' meeting dated April 5, 2017 and immediately after the completion of the Global Offering, our audit committee shall consist of Mariano Navilli, Jorge Damián Schnir, and Alejandro German Lemonnier. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE rules applicable to corporate governance. Our Board of Directors has determined that each of Mariano Navilli, Jorge Damián Schnir and Alejandro German Lemonnier is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NYSE rules applicable to corporate governance.
Both Jorge Damián Schnir and Alejandro German Lemonnier are "independent" as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members.
Pursuant to the Argentine Capital Markets Law, and its corresponding regulations, we are required to have an audit committee consisting of at least three members of our Board of Directors with experience in business, finance or accounting. Under CNV rules, at least a majority of the members of the audit committee must be independent directors. Decisions of the audit committee are to be recorded in a special corporate book and signed by all members of the committee who were present at the meeting where the decision we taken. Pursuant to CNV rules, the audit committee must hold at
231
least one regularly scheduled meeting every three months and with a frequency at least equal to the general meetings held by our Board of Directors.
Pursuant to Section 110 of the Argentine Capital Markets Law, the audit committee, has the following duties:
The audit committee must also prepare an annual plan for the fiscal year and report on the plan to the board of directors and the supervisory committee. Upon requirement of the audit committee, members of the board of directors, of the supervisory committee and external independent auditors may be required to attend the meetings of the audit committee, with the right to speak but not to vote. The audit committee is entitled to hire experts and counsel to assist it in its tasks and has full access to all of our information and documentation.
Independence Requirements under SEC Rule 10-A3
Pursuant to NYSE Rule 303A.06, we are required to have an audit committee that complies with SEC Rule 10-A3. Under rule 10-A3, we are required to comply with certain independent standards. Each member of the audit committee must be independent and a member of the board of directors. Pursuant to SEC Rule 10-A3, in order to be considered "independent", a member of an audit committee of a listed issuer may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:
232
Additionally, as of the date of effectiveness, at least one of the members of the audit committee must meet the criteria for independence under Rule 10-A3. By the ninetieth day following the effectiveness date, all but one member of the board of directors must meet the criteria for independence under Rule 10-A3.
Our Board of Directors adopted, as of April 5, 2017 a corporate governance manual providing the relevant provisions regarding functions and composition of the Audit Committee. Following completion of the Global Offering, such manual shall be available on the CNV's website (www.cnv.gov.ar) under the item Financial Information (Información Financiera).
Nomination and Compensation Committee
Our Nomination and Compensation Committee shall be comprised of the directors appointed by the Board of Directors.
The Nomination and Compensation Committee, among other things:
Our Board of Directors adopted a corporate governance manual providing the relevant provisions regarding functions and composition of the Nomination and Compensation Committee. Following completion of the Global Offering, such manual shall be available on the CNV's website (www.cnv.gov.ar) under the item Financial Information (Información Financiera).
Crisis Committee
The Crisis Committee shall be comprised of the CEO and of the directors appointed by the Board of Directors.
The Crisis Committee decides on matters of urgency or on any matters for which: (i) there are potential public repercussions outside of the ordinary course of business; (ii) there is no time to wait for a resolution or action from the full Board of Directors meeting, and (iii) any delay may create a risk for the Company.
Any decisions or action adopted or executed by the Crisis Committee is subsequently reported to our Board of Directors for its consideration, approval or correction. Our corporate governance manual details the relevant functions and compensation of our Crisis Committee.
Our Board of Directors adopted a corporate governance manual providing the relevant provisions regarding functions and composition of the Crisis Committee. Following completion of the Global Offering, such manual shall be available on the CNV's website (www.cnv.gov.ar) under the item Financial Information (Información Financiera).
Corporate Governance Committee
The Corporate Governance committee shall monitor the implementation and enforcement of our corporate governance code and the regulations issued thereunder.
233
Among its other responsibilities, the Corporate Governance Committee is responsible for:
The Corporate Governance Committee shall be composed by members of our Board of Directors appointed by our Board of Directors. Following completion of the Global Offering, such manual shall be available on the CNV's website (www.cnv.gov.ar) under the item Financial Information (Información Financiera).
Our Board of Directors adopted a corporate governance manual providing the relevant provisions regarding functions and composition of the Corporate Governance Committee. CNV's website (www.cnv.gov.ar.) under the item Financial Information (Información Financiera).
Code of Ethics
Among its responsibilities, our Corporate Governance Committee must prepare a draft of the code of ethics that will be binding upon the Company and all of our employees. Such code must be approved by our Board of Directors.
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PRINCIPAL AND SELLING SHAREHOLDERS
Our Company is beneficially owned or controlled by the Navilli family. Prior to the Global Offering, the Navilli family beneficially owned 100% of our share capital which consisted of AR$15,000,000 represented by 150,000,000 ordinary, non-endorsable shares, with a par value of AR$0.10 each and the right to one vote per share.
Pursuant to our April 5, 2017 shareholders' meeting, after the public offering of our Class B ordinary shares, we will have Class A ordinary shares and Class B ordinary shares. Prior to the Delivery Date the selling shareholders will undertake a share conversion whereby Class A ordinary shares will be converted into Class B ordinary shares, which are being offered by the selling shareholders in connection with the Global Offering. Following completion of the Global Offering, we will have Class A ordinary shares and Class B ordinary shares, and upon full exercise of the over-allotment option, we will have Class A ordinary shares and Class B ordinary shares. References to our shareholder's meeting adopting a resolution for the modifications of our bylaws and the designation of our new board of directors refer to a meeting to be held prior to the effectiveness of the Global Offering.
Each ordinary share of our share capital represents the same economic interests, except that holders of our Class A ordinary shares shall be entitled to five votes per Class A ordinary share and holders of our Class B ordinary shares shall be entitled to one vote per Class B ordinary share. All such shares shall be book-entry shares, with a par value of AR$0.10 per share.
A total of ordinary shares, consisting of Class B ordinary shares are being offered in the Global Offering and ordinary shares, consisting of Class B ordinary shares are being offered by the selling shareholders.
The following table sets forth certain information relating to the beneficial ownership of our shares outstanding prior to the completion of the Global Offering:
|
Ordinary Shares Beneficially Owned Before the Global Offering |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Number | Percent | Total Votes | |||||||
Aldo Adriano Navilli* |
37,500,000 | 25 | % | 37,500,000 | ||||||
Carlos Adriano Navilli* |
37,500,000 | 25 | % | 37,500,000 | ||||||
Ricardo Alberto Navilli* |
37,500,000 | 25 | % | 37,500,000 | ||||||
Adriana Elba Navilli* |
30,000,000 | 20 | % | 30,000,000 | ||||||
Marcos Aníbal Villemur* |
7,500,000 | 5 | % | 7,500,000 | ||||||
| | | | | | | | | | |
Total |
150,000,000 | 100 | % | 150,000,000 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Shareholders' Agreement
The members of the Navilli family are parties to two shareholders' agreements both dated as of January 18, 2017, which will come into force upon the earlier of April 14, 2017 or upon the completion of the Global Offering, which we refer to collectively as the Shareholders' Agreement. Upon its entry into force, the Shareholders' Agreement will replace in its entirety a prior shareholders' agreement entered into by the Navilli family on March 19, 2004 and subsequently amended. Under the terms of the Shareholders' Agreement and for purposes of making determinations thereunder, Adriana Elba Navilli and Marcos Aníbal Villemur are viewed as a single signatory to the Shareholders' Agreement.
235
Pursuant to the Shareholders' Agreement, during the first five years subsequent to its effective date, the Navilli family agrees to take all necessary actions to ensure that the office of the chairman of our Board of Directors shall be exercised by Aldo Adriano Navilli, or by whomever Aldo Adriano Navilli may appoint in his sole discretion. Mr. Aldo Adriano Navilli may resign this position freely and at his own discretion, at any time, with no need of prior notice or formalities of any kind.
Additionally, the Navilli family agrees to take all necessary actions to ensure that all the decisions related to the government, management and supervision of the Company (including its activities, business and assets) shall be adopted by the favorable decision of at least three (3) signatories to the Shareholders' Agreement, provided that during the first five years of the Shareholders' Agreement, one of the signatories must be Aldo Adriano Navilli.
Composition of the Board of Directors (Clause 3.02 of the Shareholders' Agreement)
In connection with the management of the Company, the Shareholders' Agreement provides that each signatory shall have the right to appoint, to remove or replace, at any time and at its own proposal, two regular directors and an equal number of alternate directors. Moreover, the Navilli family agrees to take all necessary actions to ensure that any independent director shall be appointed from the list jointly proposed by at least three (3) signatories, one of whom, during the first five years of the Shareholders' Agreement, must be Aldo Adriano Navilli.
Board of Directors Meetings (Clause 3.02 of the Shareholders' Agreement)
In connection with any meeting of the board of directors, the Navilli family agrees to take all necessary actions to ensure that the board of directors shall validly meet with the attendance or representation of more than half of the number of directors, among which at least one of the directors, during the first five years of the Shareholders' Agreement, must be a nominee of Aldo Adriano Navilli.
Additionally, the Navilli family agrees to take all necessary actions to ensure that, except for the Relevant Matters, as described below:
Shareholders' Meetings (Clause 3.03 of the Shareholders' Agreement)
In connection with shareholders' meetings, the Navilli family agrees to take all necessary actions to ensure that the quorum of first and second calls to an ordinary shareholders' meeting is made in compliance with Argentine General Companies Law, provided that at least three signatories to the Shareholders' Agreement, one of which must be Aldo Adriano Navilli, should participate.
Except for the provision related to Relevant Matters discussed below, the Navilli family agrees to take all necessary actions to ensure that the decisions at the ordinary shareholders' meeting shall be adopted by the affirmative vote of at least three signatories to the Shareholders' Agreement, of which one must be Aldo Adriano Navilli during the first five years of the Shareholders' Agreement.
In addition, the Navilli family agrees to take all necessary actions to ensure that the quorums for a first and second call to an extraordinary shareholders' meetings shall be comprised by shareholders
236
representing at least 60% of the total votes of the Company, provided that at least three of the signatories to the Shareholders' Agreement, one of whom must be Aldo Adriano Navilli, participate.
Except for the provision related to Relevant Matters, as described below, the decisions at any extraordinary shareholders' meeting shall be adopted by the affirmative vote of at least three signatories to the Shareholders' Agreement, one of which must be Aldo Adriano Navilli during the first five years of the Shareholders' Agreement.
Relevant Matters (Clause 3.04 of the Shareholders' Agreement)
The following matters, which we refer to as Relevant Matters, are subject to different terms under the Shareholders' Agreement:
In the case of any Relevant Matters, the Navilli family agrees to take all necessary actions to ensure that the Board of Directors shall only meet with the attendance, whether present or represented, of at least more than half the number of directors. The Navilli family agrees to take all necessary actions to ensure that any decision is only adopted by the vote of the majority of all directors present provided that the affirmative votes include the votes of at least one director appointed by each of the signatories to the Shareholders' Agreement.
In addition, the Navilli family agrees to take all necessary actions to ensure that the four signatories to the Shareholders' Agreement shall attend the shareholders' meetings concerning Relevant Matters, during both the first and second calls. The Navilli family agrees to take all necessary steps to ensure that any decision made by the shareholders on the Relevant Matters be unanimously approved by all four signatories to the Shareholders' Agreement.
Transfer of Shares (Section IV of the Shareholders' Agreement)
According to the Shareholders' Agreement each signatory may freely transfer its shares (i) to its successors; or (ii) to any company in respect of which the seller shall retain absolute and unrestricted control of not less than ninety-nine percent (99%) of the share capital and voting rights (without taking into account plural votes).
Each signatory may validly transfer at any time, in one or more transactions, up to 20% of its own Class A ordinary shares at the time the Global Offering takes place. The signatories agree that any such previously described transfer of Class A ordinary shares must comply with the conversion into Class B ordinary shares entitled to one vote per share.
The Shareholders' Agreement provides that in the event that a signatory intended to make a transfer, in whole or in part, of our shares to any third party, including any other signatory, the selling shareholder must notify its decision in writing to the board of directors and non-selling Class A shareholders, who shall have a right of first refusal to purchase all of the shares offered by the selling shareholders for a term of 30 days. In the event that all non-selling shareholders resolve to exercise their respective right of first refusal, the shares offered shall be distributed pro-rata to their respective shareholdings in the Company.
The selling shareholders may not transfer Class A ordinary shares to third parties. Prior to any transfer, the selling shareholder shall request the Company to convert the Class A ordinary shares offered in an equivalent amount of Class B ordinary shares of the Company entitled to one vote per share.
237
Supplemental Agreement
In addition to the Shareholders' Agreement, the members of the Navilli family are parties to a supplementary agreement dated as of January 18, 2017 (the "Supplementary Agreement"), which will come into force along with the Shareholders' Agreement. Under the terms of the Supplementary Agreement and for purposes of making determinations thereunder, Adriana Elba Navilli and Marcos Anibal Villemur are viewed as a single signatory to the Shareholders' Agreement.
For a period of five years from the effective date of the Supplementary Agreement, Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur give their definitive, unconditional and irrevocable consent, approval and full agreement with the execution of each and all of the acts and resolutions related to the management, government and supervision of the Company (including its assets, operations and any Relevant Matter, as defined in the Shareholders' Agreement), whether present or future, as decided or advised by Aldo Adriano Navilli, in his sole discretion.
The powers of Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur under the Shareholders' Agreement related to applicable rules to the board of directors and shareholders' meetings are assigned and delegated, to the fullest extent possible, in favor of Aldo Adriano Navilli.
Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur expressly, unconditionally and irrevocably waive to the fullest extent permitted by law, to formulate, directly or indirectly (including through us), any type of claim, including any liability, cost, loss, expense, damage, prejudice and/or detriment of any kind, whether direct or indirect, moral or material against Aldo Adriano Navilli resulting from or generated by the provisions of the Supplementary Agreement and/or from the management, government, and/or control of the Company. This waiver shall not apply in any case where Aldo Adriano Navilli proceeds maliciously against the Company, as determined by a final judgment pronounced by a competent judge. Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur shall jointly and severally indemnify and hold harmless Aldo Adriano Navilli for any claims of third parties based on the management, government or control of the Company.
Changes in Shareholder Ownership
The following table sets forth certain information relating to the beneficial ownership of our Class A and Class B ordinary shares after the share conversion and prior to the completion of the Global Offering. Percentages in the following table are based on shares outstanding, consisting of Class A ordinary shares and Class B ordinary shares, after the Share Conversion but before the Global Offering, and outstanding ordinary shares, consisting of Class A ordinary shares and Class B ordinary shares, after the completion of the Global Offering. As of this date, none of our ordinary shares were held in the U.S. nor were there any residing shareholders in the U.S.
|
Class A ordinary shares Beneficially Owned after Share Conversion and Before the Global Offering |
Class B ordinary shares Beneficially Owned after Share Conversion and Before the Global Offering |
Total Votes |
After the Global Offering |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Number | Percent | Number | Percent | Number | Percentage | |||||||||||||||
Aldo Adriano Navilli |
|||||||||||||||||||||
Carlos Adriano Navilli |
|||||||||||||||||||||
Ricardo Alberto Navilli |
|||||||||||||||||||||
Adriana Elba Navilli |
|||||||||||||||||||||
Marcos Aníbal Villemur |
|||||||||||||||||||||
Total |
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Changes in Shareholder Ownership
The table below represents the evolution of our capital stock and the material changes in equity participation of our shareholders, in both cases, since December 1, 2013.
Date
|
Capital Stock (AR$.) |
Event | Major Shareholders | ||||
---|---|---|---|---|---|---|---|
December 1, 2013 |
12,000,000 | | Aldo Adriano Navilli (25%) Carlos Adriano Navilli (25%) Ricardo Alberto Navilli (25%) Adriano Carlos Navilli (15%) Adriana Elba Villemur (5%) Marcos Aníbal Villemur (5%) |
||||
May 5, 2016 |
12,000,000 |
The transfer of 1,800,000 shares from Adriano Carlos Navilli to Adriana Elba Villemur |
Aldo Adriano Navilli (25%) |
||||
February 14, 2017 |
150,000,000 |
AR$3,000,000 capital increase by means of capitalization of non-allocated retained earnings |
Aldo Adriano Navilli (25%) |
The following table presents the beneficial ownership of our capital stock ordinary shares, consisting of our Class A and Class B ordinary shares following the Global Offering, assuming the placement of all Class B ordinary shares offered and no exercise of the option to purchase additional shares from us.
Shareholder Name
|
Class A Ordinary Shares |
Class B Ordinary Shares |
Total Shares | Percentage of Capital Stock |
Total Votes | Percentage of Votes |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aldo Adriano Navilli* |
||||||||||||||||||
Carlos Adriano Navilli* |
||||||||||||||||||
Ricardo Alberto Navilli* |
||||||||||||||||||
Adriana Elba Navilli* |
||||||||||||||||||
Marcos Aníbal Villemur* |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Total: |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
239
The following table presents the beneficial ownership of our capital stocks, consisting of our Class A and Class B ordinary shares, following the Global Offering, assuming the placement of all shares offered and full exercise of the option to purchase additional shares from us.
Shareholder Name
|
Class A Ordinary Shares |
Class B Ordinary Shares |
Total Shares | Percentage of Capital Stock |
Total Votes | Percentage of Votes |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aldo Adriano Navilli* |
||||||||||||||||||
Carlos Adriano Navilli* |
||||||||||||||||||
Ricardo Alberto Navilli* |
||||||||||||||||||
Adriana Elba Navilli* |
||||||||||||||||||
Marcos Aníbal Villemur* |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
Total: |
||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Selling Shareholders Information
The following table sets forth information concerning our selling shareholders.
Name
|
Material relationships with us within the past three years |
Number of Class B ordinary shares being sold |
% of capital stock currently held |
% of capital stock immediately after this offering(1) |
Address | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aldo Adriano Navilli* |
Director, President | John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. | |||||||||||
Carlos Adriano Navilli* |
Director, Vice President | John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. | |||||||||||
Ricardo Alberto Navilli* |
Director | John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. | |||||||||||
Adriana Elba Navilli* |
Director | John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. | |||||||||||
Marcos Aníbal Villemur* |
Director | John F. Kennedy 160, B1814BKD, Cañuelas, Province of Buenos Aires, Argentina. |
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Following the Global Offering, Class A ordinary shares, and no Class B ordinary shares will be owned by Aldo Adriano Navilli, Carlos Adriano Navilli, Ricardo Alberto Navilli, Adriana Elba Navilli and Marcos Aníbal Villemur, our controlling shareholders, assuming that 100% of the shares they are offering are sold in the Global Offering. In connection with the Global Offering, our controlling shareholders have entered into a lock-up agreement preventing the sale of shares for 180 days from the date of this prospectus, subject to certain exceptions. For a further description of the lock-up agreements, see "Underwriting".
Other than the Global Offering, we are not aware of any plans by any of our shareholders to dispose of significant numbers of ordinary shares. However, after the expiration of the lock-up period, our selling shareholders or other existing shareholders, may dispose of significant numbers of our ordinary shares. We cannot predict what effect, if any, future sales of our shares, or the availability of our ordinary shares for future sale will have on the market price of our Class B ordinary shares or from time to time.
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Our internal policy, which was approved on June 2, 2016, requires that all related party transaction be subject to our policy which requires that this be conducted at arm's length. As of and for the years ended November 30, 2014, 2015 and 2016, all of our related party transactions were conducted at arm's length.
Requirements under Argentine Capital Markets Law
According to Section 72 of the Argentine Capital Markets Law, if a company that makes public offering of its shares enters into agreements or acts with a related party involving a relevant amount, it shall comply with the proceeding provided for in the Argentine Capital Markets Law. An act or agreement shall be deemed to be of a relevant amount when it exceeds one percent (1%) of the company's net equity according to the last approved financial statements.
Under the Argentine Capital Markets Law the following are considered to be related parties to a company:
(i) directors, members of the supervisory committee, managers appointed in accordance with Section 270 of Argentine Corporate Law;
(ii) the individuals and entities that control or hold a significant participation in the capital stock of the company or in the capital stock of its controlling company. According to CNV Rules a "significant participation" is a shareholding that represents at least 15% of the share capital, or a smaller holding when it entitles to the appointment of one or more directors by class of shares or when such shareholder has entered into agreements with other shareholders concerning the governance and management of the company or its controlling shareholder;
(iii) any company that is under common control of the same entity controlling the company;
(iv) ascendants, descendants, spouses or siblings of any of the individuals mentioned in (i) and (ii) above; and
(v) companies in which any of the persons referred to in (i) to (iv) above have direct or indirect significant participation.
Prior to the approval of the transaction, the board of directors or any of its members shall require the audit committee to state whether the conditions of the transaction can reasonably be considered as conducted at arms-length, or resolve based on a report on the transaction conditions required to two independent evaluation firms.
According to Section 73 of Argentine Capital Markets Law, the acts or contracts with related parties, shall be informed to CNV immediately after its approval by the board of directors, including a report of the audit committee or, when applicable, the reports of independent evaluation firms, which shall be made available to the shareholders.
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Outstanding Balances with Related Parties
The following is a summary of the outstanding balances with non-combined related parties as of November 30, 2014, 2015 and 2016 and transactions and for the years ended November 30, 2014, 2015 and 2016:
|
As of November 30, 2016 |
For the Fiscal Year Ended November 30, 2016 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
Interest (net) | |
|||||||||||||||
At November 30, 2016
|
Receivable | Payable | Sales | Purchases | Other (net) | ||||||||||||||
Shareholders |
35,886 | (213,280 | ) | | | | 281,280 | ||||||||||||
Directors |
33,190 | (26,516 | ) | | | | | ||||||||||||
Other Related Parties |
|||||||||||||||||||
Agroyet S.A. |
271 | | | | | | |||||||||||||
Alimentos Cañuelas S.A. |
1,252 | (1,537 | ) | | | | 100,320 | ||||||||||||
Cañuelas S.A. |
9,768 | | | | | | |||||||||||||
Grupo Cañuelas S.A. |
5,249 | | | | | | |||||||||||||
Molca S.A. |
116,000 | (188,135 | ) | (1,638 | ) | 184,878 | | | |||||||||||
Santa Cecilia Oeste S.R.L. |
4 | | | | | | |||||||||||||
VIU S.A. |
| (388 | ) | | | | | ||||||||||||
Zarex S.A. |
| (88 | ) | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
201,620 | (429,944 | ) | (1,638 | ) | 184,878 | | 381,600 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
As of and for the year ended November 30, 2016, we had net payables of AR$240 million in outstanding related party transactions. Of the total, AR$177 million corresponded to dividends payable to shareholders, AR$7 million advance payment for services provided by Directors and AR$56 million corresponded to outstanding net payments to other related parties. The AR$56 million in net payments due to other related parties is comprised of:
This net payable is partially offset by the following net receivables:
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|
|
|
|
For the Fiscal Year Ended November 30, 2015 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
As of November 30, 2015 | ||||||||||||||||||
|
|
Interest (net) | |
||||||||||||||||
|
Receivable | Payable | Sales | Purchases | Other (net) | ||||||||||||||
Shareholders |
| (6,200 | ) | | | | 18,000 | ||||||||||||
Directors |
14,093 | (12,663 | ) | | | | | ||||||||||||
Other related parties |
|||||||||||||||||||
Aldo Navilli Hnos. |
| (792 | ) | | | | |||||||||||||
Alimentos Cañuelas S.A. |
| (938 | ) | | | | (3 | ) | |||||||||||
Cañuelas Golf Club S.A. |
| | (12 | ) | | (225 | ) | | |||||||||||
Cañuelas S.A. |
15,629 | | | | | (14,570 | ) | ||||||||||||
Grupo Cañuelas S.A. |
7,984 | | | | | | |||||||||||||
Molisur S.A. |
153 | | | | | | |||||||||||||
Puramel S.A. |
| | | 255 | | | |||||||||||||
Pureza S.A. |
| | (30 | ) | 1,485 | | 3 | ||||||||||||
Santa Cecilia Oeste S.R.L. |
12,346 | | (25 | ) | 8,423 | | | ||||||||||||
Selene S.A. |
5,878 | | | 1,115 | | | |||||||||||||
VIU S.A. |
| | | | | 136 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
56,083 | (19,801 | ) | (859 | ) | 11,278 | (225 | ) | 3,566 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
|
|
|
For the Fiscal Year Ended November 30, 2014 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
As of November 30, 2014 |
||||||||||||||||||
|
|
Interest (net) | |
||||||||||||||||
|
Receivable | Payable | Sales | Purchases | Other (net) | ||||||||||||||
Shareholders |
| (4,400 | ) | | | | | ||||||||||||
Directors |
36,228 | (5,036 | ) | | | | | ||||||||||||
Other related parties |
|||||||||||||||||||
Aldo Navilli Hnos. |
| | (1,066 | ) | 41 | | (27 | ) | |||||||||||
Alimentos Cañuelas S.A. |
5,479 | (12,786 | ) | | | | | ||||||||||||
Cañuelas Golf Club S.A. |
| | (7 | ) | | (465 | ) | | |||||||||||
Cañuelas S.A. |
92 | | | | | | |||||||||||||
Grupo Cañuelas S.A. |
6,310 | | | | | | |||||||||||||
Molisur S.A. |
105 | | | | | | |||||||||||||
Puramel S.A. |
| (4 | ) | | (2 | ) | | 52 | |||||||||||
Pureza S.A. |
| (527 | ) | | 3,493 | | 1 | ||||||||||||
Santa Cecilia Oeste S.R.L. |
3,211 | (240 | ) | (23 | ) | | | 4,311 | |||||||||||
Selene S.A. |
| | | 273 | | | |||||||||||||
VIU S.A. |
| | | 792 | | | |||||||||||||
Zarex S.A. |
| | | | | 507 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
51,425 | (22,993 | ) | (1,096 | ) | 4,597 | (465 | ) | 4,844 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
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Management Compensation
Key management includes Directors and first line of management. Compensation to key management personnel for the years ended November 30, 2014, 2015 and 2016 were the following:
|
For the Fiscal Year Ended November 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2016 | 2015 | 2014 | |||||||
|
(thousands of Pesos) |
|||||||||
Short term employee benefits |
31,562 | 19,521 | 12,404 | |||||||
Director's fees |
122,640 | 11,597 | 33,725 | |||||||
| | | | | | | | | | |
Total compensation |
154,202 | 31,118 | 46,129 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
For a further description of key management, see "Management".
Material Contracts with Related Parties
Lease and Production Agreements with Related Parties
Las Palmas Port Lease
On January 29, 2016, we entered into a 20 year lease agreement with Molca S.A., which we refer to as the Molca Lease Agreement, pursuant to which we are entitled to operate the Las Palmas Port facilities located on the right bank of the Paraná river in northeastern Argentina. The monthly rent consists of US$125,000 plus applicable taxes. Molca S.A. is one of our affiliates and is owned by our principal shareholders, Aldo Adriano Navilli, Ricardo Alberto Navilli, Adriana Elba Navilli, Marcos Aníbal Villemur and Carlos Adriano Navilli.
Notwithstanding the 20-year term, we have the right to extend the lease for an additional ten-year term, subject to a previous notice given on year ten. In addition, we have a purchase option of the facilities which could be exercised during the term of the lease agreement. The purchase price shall be determined by two appraisals when the option is exercised.
The lease includes customary terms and conditions for this type of agreement, including our right to terminate the lease subject to the payment of US$1.5 million (12 monthly rents) plus taxes.
Credit Agreements and Guarantees with Related Parties
Cañuelas Pack Guarantee under the IFC Facility
On September 29, 2016, our affiliate Cañuelas Pack S.A. entered into a Guarantee Agreement in connection with our obligations under the IFC Facility, which has a total of US$155 million outstanding. The guarantee of Cañuelas Pack shall remain in effect until our obligations have been paid in full. The guarantee is subject to certain customary covenants and provisions. For more information on the IFC Facility, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of OperationsIndebtednessIFC Facility".
Loan to Cañuelas Golf Club S.A.
On April 11, 2014, we, as lenders, entered into a loan agreement with Cañuelas Golf Club S.A., an affiliate owned by our principal shareholders, whereby we agreed to provide a line of credit for up to AR$10 million at an annual interest rate of 12.5% until May 31, 2015. On May 30, 2015 we agreed to renew the line of credit until May 31, 2016. On May 31, 2016, we agreed to once again extend the line of credit until May 31, 2017. The purpose of the loan was to complete a real estate development in Cañuelas, Province of Buenos Aires, Argentina, which has been used extensively by the Company for
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marketing purposes, executive training, client meetings and other activities that are beneficial to our business.
Loan to Cañuelas Pack S.A.
On November 30, 2015, we, as lenders, entered into a loan agreement with Cañuelas Pack S.A., an affiliate owned by our principal shareholders, whereby we agreed to provide a line of credit up to AR$23 million at an annual interest rate of 12.5% until November 30, 2016. On March 18, 2016 we agreed to extend the line of credit until May 21, 2017. The purpose of the loan was to finance working capital.
On February 1, 2016 we, as lenders, entered into a further loan agreement with Cañuelas Pack S.A. whereby we agreed to provide a line of credit up to US$860 thousand in credit at an annual interest rate of 2% until November 30, 2016. On March 18, 2016 we agreed to extend the line of credit until May 21, 2017. The purpose of the loan was to finance working capital of Cañuelas Pack S.A.
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DESCRIPTION OF OUR SHARE CAPITAL
Set forth below is certain information relating to our share capital, including brief summaries of certain provisions of our bylaws, the Argentine General Companies Law and certain related laws and regulations of Argentina, all as in effect as at the date of this prospectus. The following summary description of our share capital does not purport to be complete and is qualified in its entirety by reference to our bylaws, the Argentine General Companies Law and the provisions of other applicable Argentine laws and regulations, including the CNV and the BYMA rules.
Share Capital
We are a stock corporation (Sociedad Anónima, Comercial, Industrial, Financiera, Inmobiliaria y Agropecuaria) duly incorporated under the laws of Argentina on April 27, 1970 for a 99 year period and registered with the Public Registry of Commerce of the Province of Buenos Aires on August 7, 1970, under Page 411, No. 1321 Book Nº 2 of Contratos de Sociedades Anónimas.
Prior to the Global Offering, our share capital consisted of AR$15,000,000 represented by 150,000,000 ordinary, non-endorsable shares, with a par value of AR$0.10 each and the right to one vote per share.
Pursuant to our , 2017 shareholders' meeting, after the public offering of our Class B ordinary shares, we will have Class A ordinary shares and Class B ordinary shares. Prior to the Delivery Date the selling shareholders will undertake a share conversion whereby Class A ordinary shares will be converted into Class B ordinary shares, which are being offered by the selling shareholders in connection with the Global Offering. Following completion of the Global Offering, we will have Class A ordinary shares and Class B ordinary shares, and upon full exercise of the over-allotment option, we will have Class A ordinary shares and Class B ordinary shares.
Each ordinary share of our share capital represents the same economic interests, except that holders of our Class A ordinary shares shall be entitled to five votes per Class A ordinary share and holders of our Class B ordinary shares shall be entitled to one vote per Class B ordinary share. All such shares shall be book-entry shares, with a par value of AR$0.10 per share.
All outstanding ordinary shares are fully paid as of the date of this prospectus. During the last three years, our issued share capital has not been modified, except as indicated. For further information of changes in ownership or otherwise in our share capital, see "Principal and Selling Shareholders".
Following the Global Offering, assuming the placement of all Class B ordinary shares offered, our authorized and issued capital stock will be , consisting of Class A ordinary shares and Class B ordinary shares. Following full exercise of the option to purchase additional Class B ordinary shares from us, our authorized and issued capital stock will be , consisting of Class A ordinary shares and Class B ordinary shares.
Pursuant to our bylaws, after the Global Offering, we are not permitted to make a public offering of Class A ordinary shares, each of which entitle holders to five votes per Class A ordinary share. In addition, after the Global Offering, and as long as the Company remains subject to the public offering regime of the CNV, it shall not issue shares entitled to more than one vote per share.
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Bylaws
Corporate Purpose
Our bylaws provide in Article 3 that the corporate purpose of Molino Cañuelas is to carry out, among others, the following activities:
Shareholders' Liability
Shareholders' liability for the losses of a company are limited to the value of each respective shareholders' stake in the company. Under the Argentine General Companies Law, however, shareholders who voted in favor of a resolution that is subsequently declared void by a court as contrary to Argentine law or a company's bylaws (or regulation, if any) may be held jointly and severally liable for damages to such company, other shareholders or third parties resulting from such resolution. In addition, a shareholder who votes on a business transaction in which the shareholder's interest conflicts with that of the company may be liable for damages under the Argentine General Companies Law, but only if the transaction would not have been validly approved without such shareholders' vote.
Voting Rights
Under our bylaws, each Class A ordinary share entitles the holder thereof to five votes at any meeting of our shareholders, and each Class B ordinary shares entitles the holder thereof to one vote at any meeting of our shareholders. Under the Argentine General Companies Law, a shareholder is required to abstain from voting on any resolution in which its direct or indirect interests conflict with, or are different from, that of the company. In the event that such shareholder votes on such resolution, and the relevant resolution would not have been approved without the shareholders' vote, such shareholder may be held liable for damages to the company, other shareholders and third parties, and the resolution may be declared void by a competent court.
Pursuant to Section 244 of the Argentine General Companies Law, all shareholders' meetings, whether convened on a first or second quorum call, require the affirmative vote of the majority of shares with right to vote in order to approve the following decisions: the voluntary winding-up of the company in advance, transfer of the domicile of the company outside of Argentina, a fundamental change to our corporate purpose of the company, total or partial mandatory repayment by the shareholders of the paid-in capital and a merger or a spin-off, where we will not be the surviving entity.
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In the aforementioned cases, the plurality of votes granted by a certain class of shares shall not be considered, meaning shareholders of our Class A ordinary shares shall only be entitled to one vote per share. Also, under Section 284 of the Argentine General Companies Law, plurality of votes will not be applicable to the election of syndics or members of the supervisory committee.
Notwithstanding the above, pursuant to our bylaws, the favorable vote of two thirds of the votes held by the holders of Class A ordinary shares is required to resolve:
In addition, the favorable vote of the absolute majority of the votes held by the holders of Class B ordinary shares present at a shareholders' meeting convened for such a purpose, whichever the percentage of capital stock that such Class B ordinary shares represent, shall be required to validly resolve any amendment of article four of our bylaws, which among other matters, addresses:
In accordance with Argentine General Companies Law and our bylaws, as long as we remain an entity authorized to publicly offer our Class B ordinary shares, we will not issue additional shares of any class that entitle the holder to more than one vote per share. For further information regarding Voting Rights, see "Principal and Selling ShareholdersShareholders' Agreement" and "Description of our Share CapitalShareholders' Meetings"
In accordance with article four of our bylaws, Class A ordinary shares may be converted into Class B ordinary shares at an exchange rate of one Class A ordinary share to one Class B ordinary share. The conversion may be conducted at any time at the request of a holder of Class A ordinary shares, by means of a notice addressed to the Board of Directors. The notice to the board of directors must contain:
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Once provided, such request notice will constitute an irrevocable instruction to the Board of Directors to convert the Class A ordinary shares. If a request notice is received after notice of a shareholder's meeting has already been published, the Board of Directors will wait to resolve the request notice until after the meeting has been held. Otherwise, the Board of Directors will meet and provide a resolution for the conversion request within three business days counted as from the receipt of the request notice. Once the conversion is resolved, the Board of Directors will communicate the new composition of the capital stock to the relevant authorities and, if applicable, to the entity in charge of keeping the register of shares. In addition, the Board of Directors will immediately block the Class A ordinary shares which conversion into Class B ordinary shares has been requested.
Registration Requirements of Foreign Companies or Entities Holding Class B Ordinary Shares Directly
Under Argentine law, foreign companies or entities that hold shares directly (and not in the form of ADSs) in an Argentine company must register with a local public registry to exercise certain shareholder political rights, including voting rights. Although the requirements may vary in the different local jurisdictions in which the foreign company or entity may be registered, in order to register with the public registry, the foreign company or entity is usually required to comply with, among other requirements: (1) filing of its corporate and accounting documents so as to show that it is not a special purpose vehicle organized solely to conduct business in Argentina, (2) verification that it is able to conduct business in its place of incorporation and (3) provide evidence that it meets certain foreign asset requirements.
Redemption and Appraisal Rights
Our ordinary shares, including Class B ordinary shares, may be redeemed in connection with a reduction in capital by the vote of a majority of shareholders at an extraordinary shareholders' meeting. Any shares so redeemed must be canceled by us.
Whenever our shareholders approve a spin-off or merger in which we are not the surviving corporation, the dissolution prior to the expiration of the corporate term, a fundamental change in our corporate purpose, change of our domicile outside of Argentina, withdrawal, denial or voluntary retirement from public offering or delisting, our continuation in the case of withdrawal of the authorization to perform activities or cancelation of the public offering authorization, or a total or partial recapitalization following a mandatory reduction of our capital, any shareholder that voted against such action that was approved or did not attend the meeting at which the decision was taken, may withdraw and receive the book value of its shares, determined on the basis of our latest balance sheet prepared or that should have been prepared in accordance with Argentine laws and regulations, provided that such shareholder exercises its appraisal rights within a determined period. Appraisal rights must be exercised within five days following the adjournment of the meeting at which the resolution was adopted, in the event that the dissenting shareholder voted against such resolution, or within 15 days following such adjournment if the dissenting shareholder did not attend such meeting and can prove that he was a shareholder on the date of such meeting. In the case of merger or spin-off, appraisal rights may not be exercised if the shares to be received as a result of such transaction are authorized for public offering or listed. Appraisal rights are extinguished if the resolution giving rise to such rights is revoked at another shareholders' meeting held within 75 days of the meeting at which the resolution was adopted. However, because of the absence of legal precedent directly on point, there is doubt as to whether holders of ADSs will be able to exercise appraisal rights either directly or through the ADS Depositary with respect to our Class B ordinary shares represented by ADSs.
Payment on the appraisal rights must be made within one year of the date of the shareholders' meeting at which the resolution was adopted, except in the case of our withdrawal, denial or voluntary retirement from the public offering regime of the CNV, our delisting or any continuation of the
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withdrawal of the authorization to perform activities. In any such case the payment period is reduced to 60 days from the date of the adjournment of the shareholders' meeting or following the publication of the withdrawal, denial or approval of the voluntary retirement from the public offering regime of the CNV.
Preemptive and Accretion Rights
Under the Argentine General Companies Law, in the event of a capital increase, holders of existing ordinary shares of any given class have a preemptive right to subscribe for a number of shares of the same class, so that they may maintain the same proportion of shares in that class. In addition, shareholders are entitled to accretion rights to subscribe on a pro rata basis for the unsubscribed shares remaining at the end of a preemptive rights offering. Shares not subscribed by the shareholders by virtue of their exercise of preemptive rights or accretion rights may be offered to third parties. In order to facilitate the Global Offering, all of our existing shareholders have waived their preemptive and accretion rights.
Preemptive rights and accretion rights may be waived only by each shareholder on a case-by-case basis. Additionally, the Argentine General Companies Law permits shareholders at a special shareholders' meeting to suspend or limit the preemptive rights relating to the issuance of new shares in specific and exceptional cases in which the interest of our Company requires such action and, additionally, under the following specific conditions: (i) the issuance is expressly included in the list of matters to be addressed at the shareholders' meeting; and (ii) the shares to be issued are to be paid in-kind or in exchange for payment under preexisting obligations.
Furthermore, Article 12 of the Negotiable Obligations Law No. 23,576, as amended, permits shareholders at a special shareholders' meeting to suspend preemptive subscription rights for the subscription of convertible bonds under the conditions described above. According to said law, preemptive rights may also be eliminated in the event that a given company enters into an underwriting agreement with an agent for the placement of the bonds, by means of a shareholders' resolution passed with an affirmative vote of at least 50% of the outstanding share capital with a right to exercise such preemptive rights, so long as votes against such resolution do not represent 5% or more of the share capital. This provision on elimination also applies to the issuance of warrants over shares of capital stock or other securities convertible into capital stock.
Holders of ADSs may be restricted in their ability to exercise preemptive rights if a registration statement under the Securities Act relating thereto has not been filed or is not effective or an exemption is not available.
Under Section 194 of the Argentine General Companies Law, the right to preemptive subscription must be exercised within thirty days following the announcement to the shareholders that they can exercise their rights. Such announcement must be published for a period of three days in the Official Bulletin of the Province of Buenos Aires and in an Argentine newspaper of wide circulation. According to the Argentine General Companies Law, companies admitted to the public offering regime may, upon authorization of an extraordinary shareholders' meeting, reduce this period to ten days.
Notwithstanding the above, on April 5, 2017 our shareholders decided to amend Article 4 of the bylaws, among others. The amended Article 4 establishes that in the event of a capital increase a holder of existing ordinary shares of any given class has a preemptive right to subscribe for such number of shares, so that the holder may maintain the same participation in the capital stock of the Company. In addition, and notwithstanding the class of shares held, shareholders are entitled to accretion rights to subscribe on a pro rata basis for the unsubscribed shares remaining at the end of a preemptive rights offering in proportion to the percentage of shares for which the subscribing existing shareholders have exercised their preemptive rights.
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In accordance with Argentine General Companies Law and our bylaws, as long as we remain being an entity authorized to publicly offer our Class B ordinary shares, we will not issue additional shares of any class that entitle the holder to more than one vote per share.
Liquidation Rights
In the case of our liquidation or dissolution, our assets will be applied to satisfy our outstanding liabilities and then proportionally distributed first among our holders of preferred shares as per the terms of such preferred shares, if any. If any surplus remains, it will be proportionally distributed among holders of ordinary shares.
Form and Transfer of Shares
Our current share capital is represented by non-endorsable shares.
The registry for our shares is currently maintained by the Company in Argentina. Only those persons whose names appear on such share registry shall be recognized as owners of our ordinary shares. Transfers, encumbrances and liens on our shares must be registered in our share registry and are only enforceable against us and third parties from the moment registration occurs.
On April 5, 2017 our shareholders decided to create two classes of shares: (i) Class A ordinary shares, entitled to five votes each; and (ii) Class B ordinary shares, entitled to one vote each. All such shares shall be book-entry shares, with a par value of AR$0.10 per share. Such decision and consequently such amendment will be effective only after the public offering of our Class B ordinary shares is made. The registry of such shares shall be maintained by the Company, commercial or investment banks, or authorized entities (cajas de valores).
In addition, Article 4 of our bylaws establish that each Class A ordinary share that any member of our controlling shareholders transfers to a third party that is not another controlling shareholder shall be automatically converted into a Class B ordinary share.
Prior to giving effect to any transfer of Class A ordinary shares, the Board of Directors shall verify that the transfer of the Class A ordinary shares is performed in compliance with the requirements of Article 4 of our bylaws. If the transfer does not comply, then the transferred shares shall be converted into Class B ordinary shares.
Shareholders' Meetings
Shareholders' meetings may be ordinary or extraordinary. We are required to convene and hold an ordinary meeting of shareholders within four months of the close of each fiscal year to consider the matters specified in the first two paragraphs of Section 234 of the Argentine General Companies Law, such as the approval of our financial statements, allocation of net income for such fiscal year, approval of the reports of our Board of Directors and supervisory committee and election and remuneration of directors and members of the supervisory committee. Other matters which may be considered at an ordinary meeting convened and held at any time include the responsibility of directors and members of the supervisory committee, and capital increases without limit, according to our bylaws.
In addition, under the provisions of section 71 of the Argentine Capital Markets Law and due to our being a company authorized to publicly offer our shares, the ordinary shareholders' meeting is to undertake (i) the transfer or encumbrance of all or a substantial part of our assets, other than in the ordinary course of business; and (ii) the execution of an administration or management agreement as it relates to our business and/or assets. The same applies to the approval of any other agreement pursuant to which the assets or services received by us are paid for, totally or partially, with a percentage of our income, results or profits, if such amount is substantial as it relates to our business or assets.
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Extraordinary shareholders' meetings may be convened at any time to consider matters beyond the authority of an ordinary meeting, including:
The Argentine General Companies Law provides that shareholders' meetings may be called by our Board of Directors or by our supervisory committee or at the request of the holders of shares representing no less than 5% of the ordinary shares. Any meetings called at the request of shareholders must be held within 30 days after the request is made. Any shareholder may appoint any person as its duly authorized representative at a shareholders' meeting, by granting a proxy.
Notice of shareholders' meetings must be published for five days in the Official Bulletin of the Province of Buenos Aires, in an Argentine newspaper of wide circulation and in the publications of Argentine exchanges or securities markets in which our shares are traded, at least 20 but not more than 45 days prior to the date on which the meeting is to be held. Such notice must include information regarding the type of meeting to be held, the date, time and place of such meeting and the agenda. If a quorum is not available at such first call for the meeting, a notice for a second call for the meeting, which must be held within 30 days of the date on which the first meeting was called, must be published for three days, at least eight days before the date of the second call for the meeting. The above-described notices of shareholders' meetings may be effected simultaneously in a second call for a meeting to be held on the same day as the first call, except in the case of extraordinary meetings. Shareholders' meetings may be validly held without notice if all shares of our outstanding share capital are present and resolutions are adopted by unanimous vote of such shares.
According to our bylaws, shareholders' meetings may be conducted electronically.
Under the Argentine General Companies Law and our bylaws, quorum for ordinary meetings of shareholders on first call is a majority of the shares entitled to vote, and action may be taken by the affirmative vote of an absolute majority of the votes present. If a quorum is not available at the first call for the meeting, a second call for the meeting may be held, at which time quorum will be met with whichever number of shares entitled to vote is present, and wherein action may be taken by the holders of an absolute majority of the votes present, regardless of the number of such votes or shares. The quorum for an extraordinary shareholders' meeting on first call is 60% of the shares entitled to vote, and if such quorum is not available, an extraordinary meeting following a second call may be held in accordance with our bylaws- with whichever number of the shares entitled to vote.
Pursuant to Section 244 of the Argentine General Companies Law, all shareholders' meetings, whether convened on a first or second quorum call, require the affirmative vote of the majority of shares with right to vote in order to approve the following decisions: the voluntary winding-up of the company, transfer of the domicile of the company outside of Argentina, a fundamental change to our
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corporate purpose of the company, total or partial mandatory repayment by the shareholders of the paid-in capital and a merger or a spin-off, where we will not be the surviving entity. In the aforementioned cases, the plurality of votes granted by a certain class of shares shall not be considered, meaning shareholders of our Class A ordinary shares shall only be entitled to one vote per Class A share. Also, under Section 284 of the Argentine General Companies Law, plurality of votes will not be applicable to the election of syndics or members of the supervisory committee.
Moreover, pursuant to our bylaws, the favorable vote of two thirds of the votes held by the holders of Class A ordinary shares is required to resolve: (i) a merger with another company; (ii) our voluntary early dissolution; (iii) the transfer of our domicile outside of Argentina; (iv) the fundamental change to our corporate purpose. For further information regarding shareholders' meetings, see "Principal and Selling ShareholdersShareholders' Agreement".
In addition, the favorable vote of the absolute majority of the votes held by the holders of Class B ordinary shares present at a shareholders' meeting convened for such a purpose, whichever the percentage of capital stock that such Class B ordinary shares represent, shall be required to validly resolve any amendment which addresses:
For a further information on these provisions, see "Description of our Share CapitalElection of Directors, Quorum and Resolutions".
Election of Directors, Quorum and Resolutions
Currently, the shareholders present at any ordinary meeting may determine the size of our Board of Directors, provided that there shall be no less than seven and no more than fifteen regular members. The shareholders present at any ordinary meeting may appoint the same or less number of alternate directors.
In the event that the shareholders' meeting sets forth that our Board of Directors shall be composed by seven or more regular members but less than nine members (i) such appointed members shall remain in office for two years; and (ii) half of the members shall be replaced each year.
In the event that the shareholders' meeting sets forth that our Board of Directors shall be composed by nine or more members (i) such appointed members shall remain in office for three years; and (i) one-third of the members shall be replaced each year.
Members of our Board of Directors shall remain in office until replaced. In the event that any member resigns, a designated substitute director will take his or her place. If no substitute has been designated by the shareholders, the supervisory committee will have to name a new director at the following shareholders' meeting, unless one is already provided for in the bylaws.
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According to our bylaws, quorum for board meetings is the majority of board members, and any action may be taken by the affirmative vote of an absolute majority of those present that are entitled to vote on such action, having the president double vote in the event of a tie.
The Argentine General Companies Law allows for cumulative voting to elect up to one third of vacant board positions. The remaining positions are elected using a cumulative voting system. Cumulative voting is a system designed to protect holders with non-controlling interests, as it gives rise to the possibility, but does not ensure, that non-controlling interests will be able to elect some of their candidates to our Board of Directors. Under this system, the number of votes corresponding to members participating in the proceeding are multiplied by the number of contemplated vacancies, which cannot exceed one third of the vacancies. The larger the number of vacancies, the greater the possibility that minority groups of shareholders will win positions in our Board of Directors.
For further information regarding our selling shareholders' commitment, in relation to the election of directors, quorum and resolutions, see "Principal and Selling ShareholdersShareholders' Agreement".
End of Fiscal Year
Our fiscal year ends on November 30 of each year.
Share Capital of our Subsidiaries
The following table reflects our equity interest and voting rights in our subsidiaries as of the date of this prospectus and after completing the Reorganization:
Subsidiary
|
Equity Interest (%) | Voting Interest (%) | Place of Incorporation | |||
---|---|---|---|---|---|---|
Molino Americano S.A. |
100 | 100 | Argentina | |||
Molino Cañuelas |
100 | 100 | Argentina | |||
Empresa de Alimentos Cañuelas S.R.L. |
100 | 100 | Bolivia | |||
Empresa de Servicios Molca S.R.L. |
100 | 100 | Bolivia | |||
Moinho Cañuelas |
100 | 100 | Brazil | |||
Cañuelas Chile S.P.A. |
100 | 100 | Chile | |||
Alimentos Cañuelas Chile S.P.A. |
100 | 100 | Chile | |||
Molino Americano S.A. |
100 | 100 | Uruguay | |||
Meats S.R.L. |
100 | 100 | Argentina | |||
Southern Multinvest S.R.L. |
100 | 100 | Argentina | |||
Finexcor S.R.L. |
100 | 100 | Argentina | |||
Molisur S.A. |
67 | 67 | Argentina |
Mandatory Acquisition Public Offer
Mandatory Public Offers Required Pursuant to Argentine Capital Markets Law and the CNV rules
Mandatory Public Offer in the Case of Significant Acquisition of Our Capital Stock and Votes
Pursuant to the Argentine Capital Markets Law and the CNV rules, any person who directly or indirectly intends to acquire for value, whether acting individually or in conjunction with others, in a single transaction or a series of transactions over a period of ninety (90) calendar days, a number of voting shares, stock warrants or stock options, convertible securities or other similar instruments issued by a company, which directly or indirectly give such person the right to subscribe, acquire or otherwise convert into voting shares, irrespective of how the transaction is carried out, an amount of shares which, when considered with such person's existing interests in a company, equals a "significant interest" in the company's voting capital stock and/or votes, must, within ten days after a firm decision to make an offer to acquire any such instruments is made, announce a public tender offer to acquire and/or
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swap securities in accordance with the procedure and scope established in under the CNV rules. We refer to such an offer as an OPA.
According to the CNV rules (Resolution CNV 689), a "significant interest" means an interest equal to or greater than thirty-five percent (35%) and up to fifty percent (50%) of the voting capital stock and or the votes of the company. When trying to achieve an interest equal to or greater than thirty-five percent (35%) of the voting capital stock and/or the votes of the company, the offer shall be made on a number of securities that would allow the purchaser to achieve at least fifty percent (50%) of the voting capital stock of the company, provided, however, that such obligation shall not apply to those cases in which the acquisition of the "significant interest" does not otherwise result in the acquisition of control of the company. When trying to reach a stake greater than fifty percent (50%) of the voting capital stock and or the votes of the company, the offer shall be made on a number of shares that would allow the purchaser to reach one hundred percent (100%) of the voting capital stock of the company.
The price offered in an OPA shall be determined by the offeror with the following exceptions:
In order to determine the purchase price, the purchaser must also consider the following criteria, according to the CNV rules:
When the securities are acquired in breach of the obligation to make a public offer as stated herein, the CNV will declare such acquisition illegal and ineffective for administrative purposes and will carry out the auction of the shares acquired in breach, without prejudice of other applicable penalties.
Public Offers in the Case of Voluntary Withdrawal from the Public Offer and Listing System in Argentina
The Argentine Capital Markets Law and the CNV rules also provide that, when a company whose shares are publicly offered voluntarily agrees to withdraw from the public offer and listing system, the company must follow the procedures contemplated in CNV rules and must also launch a mandatory public offer to acquire the full amount of its shares and/or stock warrants or securities convertible into shares or stock options, in accordance with the provisions of the CNV rules. The public offer need not be addressed to any shareholders who voted for withdrawal at the relevant shareholders' meeting. The public offer may be made solely as a sale transaction, and payment thereunder must be made in cash.
The company's own shares may be bought solely by using earned and net profits or freely-available cash reserves, provided that they are fully paid-up, and for the amortization or disposition thereof, within the term established in Section 221 of the Argentine General Companies Law. The company must provide the CNV with proof of the company's financial capacity to buy such shares as well as
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proof of the fact that the company's financial soundness will not be adversely affected as a result of payment of the shares.
The price offered in the case of voluntary withdrawal from the public offer and listing system in Argentina must be fair and the following criteria must be taken into account for purposes of that fairness determination:
The price offered shall not be lower than the average trading price referred to above. The criteria for calculation of the price per share in the event of withdrawal from public offer and listing in Argentina are established in the Argentine Capital Markets Law and the CNV rules and may differ from the price that might arise from application of the Argentine Capital Markets Law in the event of a shareholder exercising his appraisal right.
Mandatory or Voluntary Acquisition Public Offer in the Event of Almost Total Control (Squeeze Out)
If one person directly or indirectly owns 95% or more of the outstanding shares of a company whose shares are publicly offered in Argentina, any minority shareholder may require the controlling shareholder to launch a mandatory public offer for all the outstanding shares of the company. Additionally, a person who directly or indirectly owns 95% or more of the outstanding shares of a public company in Argentina may unilaterally make the decision to buy all of the outstanding shares of the company within six months of the date on which said person attains said 95% ownership of the company, and withdraw the company from the system for public offer and listing of shares. The price offered must be fair, in accordance with the criteria listed above and established in the Argentine Capital Markets Law and the CNV rules.
Mandatory Public Offer Required Pursuant to Our Bylaws
Tender Offer Process
Notwithstanding the applicability of the provisions of the Argentine Capital Markets Law and the CNV rules described above (see "Description of our Share CapitalMandatory Acquisition Public OfferMandatory public offer required pursuant to Argentine Capital Markets Law and the CNV rules"), Article 4, Sections (IX), (X) and (XI) of our bylaws set forth an alternative regime for mandatory public offers, which shall be applicable in case the regime set forth by the Argentine Capital Markets Law and the CNV rules are abrogated.
The alternative regime establishes that, without complying with the tender offer process explained below, none of our ordinary shares or interests in our ordinary shares (including, but not limited to, debentures, debt notes and coupons of shares) may be acquired, directly or indirectly, when, as a consequence of such acquisition, the acquirer shall be directly or indirectly the holder or controller of
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ordinary shares or interests of the Company, which together with its previous holdings, represent, in the aggregate, fifty percent (50%) or more of our total votes. Such acquisitions are referred to in this subsection as "Control Acquisitions".
As used above, the term "indirectly" shall include the holdings of the controlling companies of the Tender Offeror, the controlled companies of the Tender Offeror, and any companies subject to common control. Additionally, any holdings a person owns through trusts, ADSs or other equivalent mechanisms, as well as the holdings of any person with which the Tender Offeror acts in joint basis, shall be computed.
Notwithstanding the foregoing, the following acquisitions shall be excluded from the definition of "Control Acquisitions", and thus not subject to the provisions of the tender offer process:
Based on the above, anyone wishing to carry out a Control Acquisition, which we refer to as the Tender Offeror, must make a tender offer, which we refer to as the Tender Offer, for all of our shares of all classes and all our securities convertible into shares of the Company, in accordance with the following procedure:
(i) The Tender Offeror must notify the Company of the tender offer by means of a written notice, within ten (10) days from the adoption of a resolution to carry out a Control Acquisition. The notice, which we refer to as the Tender Offer Notice, shall inform the Company of all of the terms and conditions of any agreement or pre-agreement that the Tender Offeror executed or plans to execute with a shareholder of the Company, which we refer to as the Prior Agreement, under which a Control Acquisition would be completed. The following additional minimum information shall be included in the Tender Offer Notice:
(ii) We will mail to each shareholder or holder of securities convertible into ordinary shares, at the Tender Offeror's expense, a copy of the tender offer notice delivered to us as indicated above.
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(iii) The Tender Offeror will also mail or by other reliable means provide, to each shareholder or holder of securities convertible into ordinary shares, a copy of the Tender Offer Notice delivered to us, and will publish a notice including substantially the information indicated in the Tender Offer Notice, at least once every two weeks, beginning on the date in which the Tender Offer Notice is delivered to us, and ending on the expiration date of the Tender Offer. Subject to applicable legal provisions, such publications shall be made in the business section in newspapers of general circulation in Argentina and in any other jurisdiction in which stock exchange market our ordinary shares are listed and/or negotiated, as well as in the informative bulletins of those stock exchange markets.
(iv) The Tender Offer cannot expire prior to 60 days following the date in which the Tender Offer Notice was given to the shareholders or published as explained in item (iii), in which case the term shall be counted as from the date of the first publication.
(v) The Tender Offeror will acquire all the ordinary shares and/or securities convertible into ordinary shares tendered by their respective owners prior to the expiration date of the Tender Offer.
(vi) The transaction provided for in the Prior Agreement may be concluded at any time after the delivery of notice of the Tender Offer to the Company.
(vii) There will be no difference in the consideration to be offered for ordinary shares of any class. In addition, the consideration to be offered may not be lower than the highest price that the Tender Offeror, acting individually or together with its affiliates and / or other persons, has paid or agreed to pay:
Related Transactions
Any merger, consolidation or other form of combination that has substantially the same effects, which we refer to as the Related Transaction, that involves us and any other person that previously concluded a Control Acquisition (or such other transaction with equivalent effects), which we refer to as the Interested Shareholder, shall only conclude if the consideration that each of our ordinary shareholders will receive as a consequence of such Related Transaction is the same for all ordinary shareholders and not less than the highest price the Interested Shareholder, acting individually or together with its affiliates and/ or other persons, has paid or agreed to pay for the ordinary shares of the Company of any class during the 180 calendar days prior to the date of the Tender Offer.
Violation of Tender Offer Process and Related Transaction Process
Ordinary shares and securities acquired in violation of the provisions set forth above under "Description of our Share CapitalMandatory public offer required pursuant to our bylawsTender Offer Process" and "Description of our Share CapitalMandatory public offer required pursuant to our bylawsRelated transactions", shall not entitle the acquirer to any voting rights or economic rights pursuant to any dividend or other distributions, and shall not be considered for the purposes of calculating the required quorum.
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DESCRIPTION OF THE AMERICAN DEPOSITARY SHARES
American Depositary Shares
The Bank of New York Mellon, as ADS Depositary, will register and deliver ADSs. Each ADS will represent Class B ordinary shares (or a right to receive Class B ordinary shares) deposited with Banco Santander Río S.A., as custodian for the ADS Depositary in Argentina. Each ADS will also represent any other securities, cash or other property which may be held by the ADS Depositary. The ADS Depositary's office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon's principal executive office is located at 225 Liberty Street, New York, New York 10286.
You may hold ADSs either (A) directly (i) by having an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depositary Trust Company, which we refer to as DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Registered holders of uncertificated ADSs will receive statements from the ADS Depositary confirming their holdings.
As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Argentine law governs shareholder rights. The ADS Depositary's will be the holder of the Class B ordinary shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the ADS Depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the ADS Depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. Directions on how to obtain copies of those documents are provided under "Where You Can Find More Information".
Dividends and Other Distributions
How will you receive dividends and other distributions on the Class B ordinary shares?
The ADS Depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on Class B ordinary shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of Class B ordinary shares your ADSs represent.
Cash. The ADS Depositary will convert any cash dividend or other cash distribution we pay on the Class B ordinary shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the ADS Depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See "Taxation". The ADS Depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a
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time when the ADS Depositary cannot convert the foreign currency, you may lose some of the value of the distribution.
Class B Ordinary Shares. The ADS Depositary may distribute additional ADSs representing any Class B ordinary shares we distribute as a dividend or free distribution. The ADS Depositary will only distribute whole ADSs. It will sell Class B ordinary shares which would require it to deliver a fraction of an ADS (or ADSs representing those Class B ordinary shares) and distribute the net proceeds in the same way as it does with cash. If the ADS Depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new Class B ordinary shares. The ADS Depositary may sell a portion of the distributed Class B ordinary shares (or ADSs representing those Class B ordinary shares) sufficient to pay its fees and expenses in connection with that distribution.
Rights to Purchase Additional Class B Ordinary Shares. If we offer holders of our securities any rights to subscribe for additional Class B ordinary shares or any other rights, the ADS Depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the ADS Depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The ADS Depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the ADS Depositary that it is legal to do so. If the ADS Depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of Class B ordinary shares, new ADSs representing the new Class B ordinary shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the ADS Depositary. U.S. securities laws may restrict the ability of the ADS Depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
Other Distributions. The ADS Depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the ADS Depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the ADS Depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The ADS Depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the ADS Depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
The ADS Depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, Class B ordinary shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, Class B ordinary shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The ADS Depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive Class B ordinary shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the ADS Depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
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How can ADS holders withdraw the deposited securities?
You may surrender your ADSs for the purpose of withdrawal at the ADS Depositary's office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the ADS Depositary will deliver the Class B ordinary shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the ADS Depositary will deliver the deposited securities at its office, if feasible. The ADS Depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the ADS Depositary for the purpose of exchanging your ADR for uncertificated ADSs. The ADS Depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the ADS Depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the ADS Depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
Voting Rights
How do you vote?
ADS holders may instruct the ADS Depositary how to vote the number of deposited Class B ordinary shares their ADSs represent. If we request the ADS Depositary to solicit your voting instructions (and we are not required to do so), the ADS Depositary will notify you of a shareholders' meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the ADS Depositary how to vote. For instructions to be valid, they much reach the ADS Depositary by a date set by the ADS Depositary. The ADS Depositary will try, as far as practical, subject to the laws of Argentine and the provisions of our articles of association or similar documents, to vote or to have its agents vote the Class B ordinary shares or other deposited securities as instructed by ADS holders. If we do not request the ADS Depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the ADS Depositary may try to vote as you instruct, but it is not required to do so. The ADS Depositary is not obligated to vote any deposited securities unless it received a legal opinion to the effect that the resolutions to be voted upon at the shareholders' meeting are not contrary to Argentine law or our by-laws (estatutos sociales).
Except by instructing the ADS Depositary as described above, you won't be able to exercise voting rights unless you surrender your ADSs and withdraw the Class B ordinary shares. However, you may not know about the meeting enough in advance to withdraw the Class B ordinary shares. In any event, the ADS Depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed or as described in the following sentence. If we asked the ADS Depositary to solicit your instructions at least 30 days before the meeting date but the ADS Depositary does not receive voting instructions from you by the specified date, it will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by your ADSs. The ADS Deposistary will give a discretionary proxy in those circumstances to vote on all questions as to be voted upon unless we notify the ADS Depositary that:
We are required to notify the ADS Depositary if one of the conditions specified above exists.
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We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the ADS Depositary to vote your Class B ordinary shares. In addition, the ADS Depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your Class B ordinary shares are not voted as you requested.
In order to give you a reasonable opportunity to instruct the ADS Depositary as to the exercise of voting rights relating to deposited securities, if we request the ADS Depositary to act, we agree to give the ADS Depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date.
We and the ADS Depositary may change voting procedures or adopt additional procedures as we determine may be necessary or appropriate to give effect, as nearly as practicable, to voting instructions received or deemed received from ADS holders.
Fees and Expenses
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|
|
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Persons depositing or withdrawing shares or ADS holders must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of Class B ordinary shares or rights or other property | |
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | ||
$.05 (or less) per ADS | Any cash distribution to ADS holders | |
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the Class B ordinary shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the ADS Depositary to ADS holders | |
$.05 (or less) per ADS per calendar year | Depositary services | |
Registration or transfer fees | Transfer and registration of Class B ordinary shares on our share register to or from the name of the ADS Depositary or its agent when you deposit or withdraw shares | |
Expenses of the ADS Depositary | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars | |
Taxes and other governmental charges the ADS Depositary or the custodian has to pay on any ADSs or Class B ordinary shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | As necessary | |
Any charges incurred by the ADS Depositary or its agents for servicing the deposited securities | As necessary |
The ADS Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing Class B ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The ADS Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property
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to pay the fees. The ADS Depositary may collect its annual fee for ADS Depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The ADS Depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The ADS Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the ADS Depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the ADS Depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the ADS Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the ADS Depositary and that may earn or share fees, spreads or commissions.
The ADS Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the ADS Depositary or its affiliate receives when buying or selling foreign currency for its own account. The ADS Depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the ADS Depositary's obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The ADS Depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the ADS Depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities
The ADS Depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering ADSs and subject to any conditions or procedures the ADS Depositary may establish.
If deposited securities are redeemed for cash in a transaction that is mandatory for the ADS Depositary as a holder of deposited securities, the ADS Depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.
If there is any change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the ADS Depositary receives new securities in exchange for or in lieu of the old deposited securities, the ADS Depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the ADS Depositary decides it would not be lawful and to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the ADS Depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
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If there is a replacement of the deposited securities and the ADS Depositary will continue to hold the replacement securities, the ADS Depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.
If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the ADS Depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the ADS holders.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the ADS Depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the ADS Depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the ADS Depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The ADS Depositary will initiate termination of the deposit agreement if we instruct it to do so. The ADS Depositary may initiate termination of the deposit agreement if
If the deposit agreement will terminate, the ADS Depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the ADS Depositary may sell the deposited securities. After that, the ADS Depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the ADS Depositary will sell as soon as practicable after the termination date.
After the termination date and before the ADS Depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the ADS Depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere with the selling process. The ADS Depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The ADS Depositary will continue to collect distributions on deposited securities, but, after the termination date, the ADS Depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.
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Limitations on Obligations and Liability
Limits on Our Obligations and the Obligations of the ADS Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the ADS Depositary. It also limits our liability and the liability of the ADS Depositary. We and the ADS Depositary:
In the deposit agreement, we and the ADS Depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the ADS Depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of Class B ordinary shares, the ADS Depositary may require:
The ADS Depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the ADS Depositary or our transfer books are closed or at any time if the ADS Depositary or we think it advisable to do so.
Your Right to Receive the Class B ordinary Shares Underlying Your ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying Class B ordinary shares at any time except:
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This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the ADS Depositary to deliver ADSs before deposit of the underlying Class B ordinary shares. This is called a pre-release of the ADSs. The ADS Depositary may also deliver Class B ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying Class B ordinary shares are delivered to the ADS Depositary. The ADS Depositary may receive ADSs instead of Class B ordinary shares to close out a pre-release. The ADS Depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the ADS Depositary in writing that it or its customer owns the Class B ordinary shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the ADS Depositary considers appropriate; and (3) the ADS Depositary must be able to close out the pre-release on not more than five business days' notice. In addition, the ADS Depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the ADS Depositary may disregard the limit from time to time if it thinks it is appropriate to do so.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is feature of DRSs that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the ADS Depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the ADS Depositary of prior authorization from the ADS holder to register that transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the ADS Depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the ADS Depositary's reliance on and compliance with instructions received by the ADS Depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the ADS Depositary.
Shareholder Communications; Inspection of Register of Holders of ADSs
The ADS Depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The ADS Depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
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The following discussion contains a description of the principal Argentine and United States federal income tax consequences of the acquisition, ownership and disposition of our Class B ordinary shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase our Class B ordinary shares or ADSs and is not applicable to all categories of investors, some of which may be subject to special rules, and does not specifically address all of the Argentine and United States federal income tax considerations applicable to any particular holder. Each prospective purchaser is urged to consult its own tax advisor about the particular Argentine and United States federal income tax consequences to it of an investment in our Class B ordinary shares or ADSs. This discussion is also based upon the representations of the depositary and on the assumption that each obligation in the deposit agreement among us, The Bank of New York Mellon, as depositary, and the registered holders and beneficial owners of the ADSs, and any related documents, will be performed in accordance with its terms.
Material Argentine Tax Considerations
The following discussion contains a description of the principal Argentine tax consequences of the acquisition, ownership and disposition of Class B ordinary shares or the ADSs. This section is the opinion of the law firm of Marval, O'Farrell & Mairal, insofar as it relates to matters of Argentine tax law, but this opinion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase our Class B ordinary shares or ADSs and is not applicable to all categories of investors, some of which may be subject to special rules, and does not specifically address all of the Argentine tax considerations applicable to any particular holder.
This section is based upon the tax laws of Argentina and the regulations thereunder as in effect on the date of this prospectus, which are subject to change, possibly with retroactive effect, and to differing interpretations. No assurance can be given that the courts or tax authorities responsible for the administration of the laws and regulations described in this section will agree with the Argentine tax consequences described herein. Each prospective purchaser is urged to consult its own tax advisor about the particular Argentine tax consequences to it of an investment in our Class B ordinary shares or the ADSs.
Taxation on Dividends
As a general rule and as from July 22nd 2016 (Law No. 27,260), dividends distributed are not subject to an income tax withholding or Dividend Tax.
However, dividends paid in excess of the Taxable Accumulated Income, as defined below, at the previous fiscal period will be subject to the Equalization Tax. Equalization Tax is applicable when dividends distributed are greater than the income determined according to the application of the Argentine income tax law, accumulated at the fiscal year immediately preceding the year on which the distribution is made, or Taxable Accumulated Income. The Equalization Tax is applicable as an income tax withholding at the rate of 35% applicable on the excess between dividends distributed and the Taxable Accumulated Income. The Equalization Tax will be imposed as a withholding tax on the shareholder receiving the dividend.
Capital Gains
The results derived from the transfer of shares, quotas and other equity interests, titles, bonds and other securities of Argentine companies are subject to Argentine income tax, regardless of the type of beneficiary who obtains the income.
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Capital gains obtained by Argentine resident entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of shares are subject to income tax at the rate of 35% on net income. Losses from a previous fiscal year as a result of the disposition of shares can only be applied and compensated against net gains resulting from the same kind of transaction, and these losses can be carried forward for five fiscal years.
Capital gains obtained by Argentine resident individuals derived from the sale, exchange or other disposition of shares and other securities are subject to income tax at the rate of 15% on net income, unless such securities are traded through stock markets and/or have public offering authorization, in which case an exemption applies (Section 20 subsection W of the Argentine Income Tax Law). Please note that Decree 2334/2013 introduced a provision stating that such exemption includes capital gains derived from the sale of shares and other securities made through a stock exchange market duly authorized by the CNV.
It is not clear whether the term "includes" (as used in Decree 2334/2013) means that the exemption provided in the Argentine Income Tax Law refers only to sales of securities made through a stock exchange market duly authorized by the CNV or whether the implementing Decree 2334/2013 intended to clarify that such sales were just one of the possibilities that may be covered by the exemption (in addition to publicly offered authorized securities, as provided in the Argentine Income Tax Law). Certain qualified tax authorities have publicly opined that the exemption exclusively refers to sales of securities made through a stock exchange market duly authorized by the CNV. Since there are no judicial precedents in connection with this recent exemption, we recommend that prospective investors consult with their own tax advisors as to whether this exemption is applicable in each particular case.
Capital gains obtained by non-Argentine resident individuals or non-Argentine entities ("Foreign Beneficiaries") from the sale, exchange or other disposition of shares are subject to Argentine income tax, as the abovementioned exemption for shares is not applicable to non-Argentine residents. Therefore, capital gains derived from the disposition of shares by Foreign Beneficiaries are subject to Argentine income tax at a rate of 15% either (i) on the net amount resulting from deducting from the sale price of the shares the acquisition cost and the expenses incurred in Argentina necessary for obtaining, maintaining and conserving this asset, as well as the deductions admitted by the Argentine Income Tax Law (the "Net Gain") or (ii) on the net presumed gain provided by the Argentine Income Tax Law for this type of transaction (i.e. 90% of the sale price), which results in an effective rate of 13.5% on the sale price. There is currently no regulation under Argentine law with respect to how this election should be made, nor to the mechanism to calculate the net capital gains resulting from a share transfer or the evidence that should be provided to validly prove the initial acquisition cost of the securities.
If a Foreign Beneficiary sells shares of an Argentine company to an Argentine resident, the Argentine resident is required to withhold the applicable capital gains tax.
In turn, when a Foreign Beneficiary sells shares of an Argentine company to another Foreign Beneficiary, the purchaser of the shares is required to withhold the applicable capital gains tax and to pay such tax to the Argentine tax authority. However, as of the date of this prospectus, the mechanism to pay the capital gains tax in this last scenario has not been regulated.
Personal Assets Tax
Argentine entities, such as us, have to pay personal assets tax corresponding to Argentine and foreign domiciled individuals and foreign domiciled entities for the holding of our shares. The applicable tax rate is 0.25% and is levied on the proportional net worth value (valor patrimonial
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proporcional), or the book value, of the shares arising from the last balance sheet of the Argentine entity calculated under Argentine GAAP.
Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine domiciled individuals and/or foreign domiciled shareholders.
Value Added Tax
The sale, exchange or other disposition of our Class B ordinary shares or ADSs, and the distribution of dividends in connection therewith, are exempted from value added tax.
Tax on Debits and Credits on Argentine Bank Accounts
Credits to and debits from bank accounts held at Argentine financial institutions, as well as certain cash payments, are subject to this tax, which is assessed at a general rate of 0.6%. There are also increased rates of 1.2% and reduced rates of 0.075% that may apply in certain cases. Owners of bank accounts subject to the general 0.6% rate may consider 34% of the tax paid upon credits to such bank accounts and taxpayers subject to the 1.2% rate may consider 17% of all tax paid upon credits to such bank accounts as a credit against income tax or tax on presumed minimum income. When financial institutions governed by Law No. 21,526 make payments acting in their own name and on their own behalf, the application of this tax is restricted only to certain specific transactions. Such specific transactions include, among others, dividends or profits distributions.
Tax on Minimum Presumed Income
Entities domiciled in Argentina are subject to this tax at the rate of 1% applicable over the total value of their taxable assets, to the extent it exceeds in the aggregate an amount of AR$200,000. Specifically, the law establishes that banks, other financial institutions and insurance companies will consider a taxable base equal to 20% of the value of taxable assets. This tax shall be payable only to the extent the income tax determined for any fiscal year does not equal or exceed the amount owed under the tax on minimum presumed income. In such case, only the difference between the tax on minimum presumed income determined for such fiscal year and the income tax determined for that fiscal year shall be paid. Any tax on minimum presumed income paid will be applied as a credit toward income tax owed in the immediately-following ten fiscal years. Please note that shares and other equity participations in entities subject to tax on minimum presumed income are exempt from this tax. The tax on minimum presumed income is abrogated for the tax year starting January 1, 2019. (Law 27,260).
Turnover Tax
In addition, turnover tax could be applicable to Argentine residents (both entities and individuals) on the transfer of shares and on the payment of dividends to the extent that such activity is conducted on a regular basis within an Argentine province or within the City of Buenos Aires. However, under the Tax Code of the City of Buenos Aires, any transactions with shares, as well as the payment of dividends are exempt from turnover tax.
Argentine holders of Class B ordinary shares or ADSs are encouraged to consult their tax advisor as to the particular Argentine turnover tax consequences derived from holding and disposing of Class B ordinary shares or ADS.
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Stamp Taxes
Stamp tax is a local tax levied on the formal execution of public or private instruments. Documents subject to stamp tax include, among others, all types of contracts, notarial deeds and promissory notes. Each province and the City of Buenos Aires have their own stamp tax legislation.
Stamp tax rates vary according to the jurisdiction and type of agreement involved. In certain jurisdictions (including the City of Buenos Aires), acts or instruments related to the negotiation of shares and other securities duly authorized for its public offering by the CNV are exempt from stamp tax.
Other Taxes
There are no Argentine federal inheritance or succession taxes applicable to the ownership, transfer or disposition of our shares. The provinces of Buenos Aires and Entre Ríos establish a tax on free transmission of assets, including inheritance, legacies, donations, etc. Free transmission of our Class B ordinary shares or ADSs could be subject to this tax.
In the case of litigation regarding the shares before a court of the City of Buenos Aires, a 3% court fee would be charged, calculated on the basis of the claim.
Tax Treaties
Argentina has signed tax treaties for the avoidance of double taxation with several countries, although there is currently no tax treaty or convention in effect between Argentina and the United States.
THE ABOVE OPINION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF CLASS B ORDINARY SHARES OR ADSs. HOLDERS ARE ADVISED TO CONSULT THEIR TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING IN EACH PARTICULAR CASE.
Material U.S. Federal Income Tax Considerations
In the opinion of Milbank, Tweed, Hadley & McCloy LLP ("Tax Counsel"), the following are the material U.S. federal income tax consequences to U.S. Holders (as defined below) of purchasing, owning and disposing of ADSs and Class B ordinary shares. It does not describe all tax considerations that may be relevant to a particular person's decision to purchase, own or dispose of ADSs or Class B ordinary shares. Because the determination of our status as a PFIC for U.S. federal income tax purposes is based on an annual determination that cannot be made until the close of a taxable year, and involves extensive factual investigation (as discussed below under "Passive Foreign Investment Company Rules"), Tax Counsel does not express any opinion herein with respect to our PFIC status in any taxable year.
This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These authorities are subject to change, possibly with retroactive effect. The following are the material U.S. federal income tax considerations for U.S. Holders (as defined herein) of purchasing, owning and disposing of ADSs and Class B ordinary shares, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person's decision to purchase, own and dispose of such securities. This discussion does not address any U.S. state or local, or non-U.S. tax consequences of the acquisition, ownership or disposition of ADSs or Class B ordinary shares. In addition, this discussion does not address any U.S. federal tax consequences other than U.S. federal income tax consequences, such as the estate and gift tax, or the Medicare tax on net investment income. The discussion applies only if the beneficial owner
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holds ADSs or Class B ordinary shares as capital assets for U.S. federal income tax purposes and it does not describe all of the tax consequences that may be relevant in light of the beneficial owner's particular circumstances. For instance, it does not describe all the tax consequences that may be relevant to:
If an entity classified as a partnership for U.S. federal income tax purposes holds ADSs or Class B ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partnerships holding ADSs or Class B ordinary shares and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of purchasing, holding and disposing of the ADSs or Class B ordinary shares.
You are a "U.S. Holder" for purposes of this discussion if you are a beneficial owner of ADSs or Class B ordinary shares and are, for U.S. federal income tax purposes:
In general, if a U.S. Holder owns ADSs, such owner will be treated as the owner of the shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.
The U.S. Treasury has expressed concerns that parties to whom ADSs are released before shares are delivered to the ADS Depositary (pre-release) or intermediaries in the chain of ownership between U.S. investors and the issuer of the security underlying the ADSs may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. investors in depositary shares. Such actions would also be inconsistent with the claiming of the reduced tax rates, described below, applicable to
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dividends received by certain non-corporate U.S. Holders. Accordingly, the analysis of the creditability of Argentine taxes, and the availability of the reduced tax rates for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by such parties or intermediaries.
Except where noted, this discussion assumes that, and we believe that, we are not, and will not become, a PFIC, as described below.
U.S. Holders should consult their tax advisors with respect to their particular tax consequences of purchasing, owning and disposing of ADSs and Class B ordinary shares, including the applicability and effect of state, local, non-U.S. and other tax laws and the possibility of changes in tax laws.
Taxation of Distributions
Distributions paid on ADSs or Class B ordinary shares other than certain pro rata distributions of Class B ordinary shares or additional ADSs in lieu of such Class B ordinary shares, or rights to acquire Class B ordinary shares or ADSs, will be treated as dividends taxable as ordinary income to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported as dividends.
Subject to applicable limitations (including a minimum holding period requirement) and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid by qualified foreign corporations to a U.S. Holder that is not a corporation are taxable at a maximum rate of 20%. A foreign company is treated as a qualified foreign corporation with respect to dividends paid on stock that is readily tradable on an established securities market in the United States, such as the NYSE, where the ADSs are to be traded. Because the Class B ordinary shares will not be readily tradable on an established securities market in the United States, dividends paid on Class B ordinary shares that are not represented by ADSs will not be subject to such special rate. A U.S. Holder should consult its tax advisor to determine whether the favorable rate will apply to dividends it receives and whether it is subject to any special rules that limit its ability to be taxed at this favorable rate.
The amount of a dividend will include the net amount withheld in respect of Argentine withholding taxes on the distribution. The amount of the dividend will be treated as foreign-source dividend income to a U.S. Holder and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations under the Code. In respect of the ADSs and the Class B ordinary shares, respectively, dividends will be included in a U.S. Holder's income on the date of the ADS Depositary's or the U.S. Holder's receipt of the dividend. The amount of any dividend paid in Pesos will be a U.S. dollar amount calculated by reference to the exchange rate for converting Pesos into U.S. dollars in effect on the relevant date of receipt regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the relevant date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars on a date after the date of receipt, which will be treated as U.S.-source ordinary income or loss.
Subject to applicable limitations (including a minimum holding period requirement) that may vary depending upon a U.S. Holder's circumstances and, in respect of the ADSs, subject to the discussion above regarding concerns expressed by the U.S. Treasury, the net amount of Argentine withholding tax (as discussed above under "Material Argentine Tax Considerations") withheld from dividends on ADSs and Class B ordinary shares will be creditable against a U.S. Holder's U.S. federal income tax liability. The rules governing foreign tax credits are complex and, therefore, a U.S. Holder should consult its tax advisor regarding the availability of foreign tax credits in its particular circumstance. Instead of claiming a credit, a U.S. Holder may, at its election, deduct such Argentine taxes in
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computing its taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States.
Sale or Other Taxable Disposition of ADSs and Class B Ordinary Shares
The gain or loss a U.S. Holder realizes on the sale or other taxable disposition of ADSs or Class B ordinary shares will be a capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder has held the ADSs or Class B ordinary shares for more than one year. The amount of a U.S. Holder's gain or loss will equal the difference between the amount realized on the disposition and the U.S. Holder's tax basis in the ADSs or Class B ordinary shares disposed of, in each case as determined in U.S. dollars. Such gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. Long-term capital gains of non-corporate U.S. Holders (including individuals) are eligible for reduced rates of taxation. In addition, certain limitations exist on the deductibility of capital losses.
In certain circumstances, Argentine taxes may be imposed upon the sale or disposition of ADSs or Class B ordinary shares. See "Material Argentine Tax ConsiderationsCapital Gains". If Argentine tax is imposed on the sale or disposition of ADSs or Class B ordinary shares, and the U.S. Holder does not receive significant foreign-source income from other sources, such U.S. Holder may not be able to credit such Argentine tax against its U.S. federal income tax liability.
Passive Foreign Investment Company Rules
A non-U.S. corporation will be considered a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules, 75% or more of its gross income is "passive income" or 50% or more of its assets constitute "passive assets." The determination as to whether a non-U.S. corporation is a PFIC is based upon the application of complex U.S. federal income tax rules (which are subject to differing interpretations), the composition of income and assets of the non-U.S. corporation from time to time and, in certain cases, the nature of the activities performed by its officers and employees.
Based upon our current and projected income, assets and activities, we do not expect to be considered a PFIC for our current taxable year or for future taxable years. However, because the determination of whether we are a PFIC will be based upon the composition of our income and assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that we will not be considered a PFIC for any taxable year. If we are a PFIC for any taxable year during which a U.S. Holder (including certain indirect U.S. Holders) holds the ADSs or Class B ordinary shares, such a U.S. Holder may be subject to adverse tax consequences. In particular, any gains recognized or "excess distributions" (generally, distributions which are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the U.S. Holder's holding period for the ADSs or Class B ordinary shares) received by a U.S. Holder will be allocated ratably over the U.S. Holder's holding period for the ADSs or Class B ordinary shares, the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC will be treated as ordinary income, and the amount allocable to other years in the U.S. Holder's holding period will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed with respect to the resulting tax. If we are deemed to be a PFIC for a taxable year, dividends on the ADSs and the Class B ordinary shares would not be "qualified dividend income" eligible for preferential rates of U.S. federal income taxation. In addition, if we are a PFIC, U.S. Holders may generally be required to comply with annual reporting requirements. U.S. Holders should consult their tax advisors regarding the application of the PFIC rules to them.
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In lieu of being subject to the special tax rules discussed above with respect to gains and excess distributions, a U.S. Holder may make a mark-to-market election with respect to its ADSs or Class B ordinary shares provided such securities are treated as "marketable stock." The ADSs and Class B ordinary shares generally will be treated as marketable stock if they are "regularly traded" on a "qualified exchange or other market" (within the meaning of the applicable Treasury regulations). It is intended that the ADSs will be listed on the NYSE, which is a qualified exchange or other market. In order for a non-U.S. stock exchange such as the BYMA to be a qualified exchange or other market (which requirements are different from those applicable to qualification as an established securities market, discussed above), such exchange must have trading volume, listing, financial disclosure, surveillance and other requirements designed to prevent fraudulent and manipulative practices, to remove impediments to and perfect the mechanism of a free and open, fair and orderly market and to protect investors. Further, the laws of the exchange's country and the rules of the exchange must ensure that such requirements are actually enforced. In addition, the rules of the exchange must effectively promote the active trading of listed stocks.
In order for the ADSs and Class B ordinary shares to be regularly traded for a given calendar year, they must be traded, other than in de minimis amounts, at least 15 days during each calendar quarter, or, in respect of an initial public offering, 1/6 of the days remaining in the quarter in which the offering occurs and at least 15 days during each remaining quarter during the calendar year. No assurance can be given that the ADSs or the Class B ordinary shares will be regularly traded or that the BYMA will constitute a qualified stock exchange or other market, in each case, for purposes of the mark-to-market election.
If a U.S. Holder makes an effective mark-to-market election, such holder will include as ordinary income in each year that we are a PFIC the excess of the fair market value of such holder's ADSs or Class B ordinary shares at the end of the year over such holder's adjusted tax basis in the ADSs or Class B ordinary shares. A U.S. Holder will be entitled to deduct as an ordinary loss in each such year the excess of such holder's adjusted tax basis in the ADSs or Class B ordinary shares over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, any gain such holder recognizes upon the sale or other disposition of the ADSs or Class B ordinary shares will be treated as ordinary income and any loss will be treated as ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market election.
A U.S. Holder's adjusted tax basis in the ADSs or Class B ordinary shares will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If a U.S. Holder makes a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs or Class B ordinary shares are no longer regularly traded on a qualified exchange or other market, or the Internal Revenue Service (the IRS) consents to the revocation of the election. U.S. Holders are urged to consult their tax advisors about the availability of the mark-to-market election, and whether making the election would be advisable in light of their particular circumstances.
If we are a PFIC for any taxable year during which a U.S. Holder holds ADSs or Class B ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, such holder will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. A mark-to-market election may be unavailable with respect to such lower-tier PFIC. U.S. Holders are urged to consult their tax advisors about the application of the PFIC rules to any of our subsidiaries.
Alternatively, U.S. Holders can sometimes avoid the rules described above by electing to treat a PFIC as a "qualified electing fund" under Section 1295 of the Code. However, this option is not
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available to you because we do not intend to comply with the requirements necessary to permit you to make this election.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless (i) the U.S. Holder is an exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against its U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
"Specified Foreign Financial Asset" Reporting
Owners of "specified foreign financial assets" with an aggregate value in excess of US$50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with their U.S. federal income tax returns. "Specified foreign financial assets" generally include any financial accounts maintained by foreign financial institutions as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF ADSS OR CLASS B ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION, AND ANY ESTATE, GIFT, AND INHERITANCE LAWS.
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J.P. Morgan Securities LLC and UBS Securities LLC are acting as joint global coordinators of the Global Offering. HSBC Securities (USA) Inc. and BBA USA Securities, Inc. are acting as joint bookrunners of the Global Offering.
We and the selling shareholders have entered into an underwriting agreement with the international underwriters dated , 2017. Subject to the terms and conditions of the underwriting agreement, we and the selling shareholders have agreed to sell to the international underwriters, and each international underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of ADSs listed next to its name in the table set forth below.
Name
|
Number of ADSs |
|
---|---|---|
J.P. Morgan Securities LLC |
||
UBS Securities LLC |
||
HSBC Securities (USA) Inc. |
||
BBA USA Securities, Inc. |
||
| | |
Total |
||
| | |
| | |
| | |
The international underwriters are committed to purchase all the ADSs offered by us and the selling shareholders if they purchase any ADSs. The underwriting agreement also provides that if an international underwriter defaults, the purchase commitments of non-defaulting international underwriters may also be increased or the international offering may be terminated.
We and the selling shareholders have entered into an Argentine placement agency agreement with AR Partners S.A., the Argentine placement agent, providing for the concurrent public offering of Class B ordinary shares in Argentina. Pursuant to the terms of such placement agency agreement, the Argentine placement agent shall carry out its best efforts to offer the Class B shares in Argentina, but has not undertaken any underwriting commitments in connection with the Argentine offering. The international and Argentine offerings are conditioned on the closing of each other. All sales of the ADSs in the United States and other countries outside of Argentina will be made through the international underwriters.
The international underwriters propose to offer the ADSs directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of US$ per ADS. Any such dealers may resell ADSs to certain other brokers or dealers at a discount of up to US$ per ADS from the initial public offering price. After the initial public offering of the ADSs, the offering price and other selling terms may be changed by the international underwriters. Sales of ADSs made outside of the United States may be made by affiliates of the international underwriters.
The international underwriters have an option to buy up to additional ADSs from us to cover sales of ADSs by the international underwriters which exceed the number of ADSs specified in the table above. The international underwriters have 30 days from the date of this prospectus to exercise this over-allotment option and may only do so to cover an over-allotment of ADSs. If any ADSs are purchased with this over-allotment option, the international underwriters will purchase ADSs in approximately the same proportion as shown in the table above. If any additional ADSs are purchased, the international underwriters will offer the additional ADSs on the same terms as those on which the ADSs are being offered.
The underwriting fee is equal to the public offering price per ADS less the amount paid by the international underwriters to us and the selling shareholders per share of ADS. The underwriting fee is
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US$ per ADS. The following table shows the per ADS and total underwriting discounts and commissions to be paid by us and the selling shareholders to the international underwriters assuming both no exercise and full exercise of the international underwriters' option to purchase additional ADSs.
|
Per ADS | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Without Over-Allotment Exercise |
With Full Over-Allotment Exercise |
Without Over-Allotment Exercise |
With Full Over-Allotment Exercise |
|||||||||
Underwriting discounts and commissions paid by us |
US$ | US$ | US$ | US$ | |||||||||
Underwriting discounts and commissions paid by selling shareholders |
US$ | US$ | US$ | US$ |
We and the selling shareholders estimate that the total expenses of the Global Offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately US$ .
We and the selling shareholders have agreed that we will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any Class A or Class B ordinary shares or ADSs or convertible into or exchangeable or exercisable for any Class B ordinary shares or ADSs, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any Class A or Class B ordinary shares or ADSs or such other securities (regardless of whether any of these transactions are to be settled by the delivery of Class B ordinary shares, ADSs or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and UBS Securities LLC and for a period of 180 days after the date of this prospectus, other than the Class B ordinary shares or ADSs to be sold hereunder.
Our directors, executive officers and the selling shareholders have entered into lock-up agreements with the international underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC and UBS Securities LLC (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Class A or Class B ordinary shares, ADSs or any securities convertible into or exercisable or exchangeable for our Class B ordinary shares or ADSs or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Class A or Class B ordinary shares, ADSs or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Class A or Class B ordinary shares, ADSs or such other securities, in cash or otherwise, or (3) make any demand for or exercise any right with respect to the registration of any Class A or Class B ordinary shares, ADSs or any security convertible into or exercisable or exchangeable for our common stock. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our Company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
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We and the selling shareholders have agreed to indemnify the international underwriters against certain liabilities, including liabilities under the U.S. Securities Act of 1933.
We will apply to have our Class B ordinary shares and the ADSs approved for listing on the NYSE under the symbol MOLC. We have also applied to list and trade our Class B ordinary shares on the BYMA, under the symbol " ".
Certain of the international underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the international underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
In connection with the international offering, the international underwriters may engage in stabilizing transactions which involves making bids for, purchasing and selling Class B ordinary shares or ADSs in the open market for the purpose of preventing or retarding a decline in the market price of the Class B ordinary shares or ADSs while the international offering is in progress. These stabilizing transactions may include making short sales of the ADSs, which involves the sale by the international underwriters of a greater number of the ADSs than they are required to purchase in this international offering, and purchasing shares of ADSs on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the international underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The international underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing ADSs in the open market. In making this determination, the international underwriters will consider, among other things, the price of the ADSs available for purchase in the open market compared to the price at which the international underwriters may purchase ADSs through the over-allotment option. A naked short position is more likely to be created if the international underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market that could adversely affect investors who purchase in the international offering. To the extent that the international underwriters create a naked short position, they will purchase ADSs in the open market to cover the position.
The international underwriters have advised us and the selling shareholders that, pursuant to Regulation M of the U.S. Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of our Class B ordinary shares or the ADSs, including the imposition of penalty bids. This means that if the representatives of the international underwriters purchase ADSs in the open market in stabilizing transactions or to cover short sales, the representatives can require the international underwriters that sold those ADSs as part of this international offering to repay the underwriting discount received by them.
In connection with the Argentine offering, the Argentine placement agent may engage in stabilizing transactions, in accordance with CNV regulations and other applicable regulations.
These activities may have the effect of raising or maintaining the market price of our Class B ordinary shares or ADSs or preventing or retarding a decline in the market price of our Class B ordinary shares or ADSs, and, as a result, the price of our Class B ordinary shares or ADSs may be higher than the price that otherwise might exist in the open market. These transactions may be effected on the NYSE or the BYMA in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
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A prospectus in electronic format may be made available on the web sites maintained by one or more international underwriters, or selling group members, if any, participating in the international offering. The international underwriters may agree to allocate a number of ADSs to international underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to the international underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
The addresses of the international underwriters are as follows:
J.P.
Morgan Securities LLC
383 Madison Avenue
New York, NY 10179, USA
UBS
Securities LLC
1285 Avenue of the Americas
New York, NY 10019 USA
HSBC Securities
(USA) Inc.
452 Fifth Avenue
New York, NY 10018 USA
BBA USA Securities, Inc.
767 Fifth Avenue
New York, NY 10018 USA
Prior to this international offering, there has been no public market for our ADSs. The initial public offering price will be determined by negotiations between us and the selling shareholders and the representatives of the international underwriters. In determining the initial public offering price, we, the selling shareholders and the representatives of the international underwriters expect to consider a number of factors including:
Neither we, the selling shareholders nor the international underwriters can assure investors that an active trading market will develop for our ADSs, or that the ADSs will trade in the public market at or above the initial public offering price.
Other than in the United States and Argentina, no action has been taken by us, the selling shareholders, the international underwriters or the Argentine placement agent that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves
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about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Selling Restrictions
Argentina
The Argentine public offering of the Class B ordinary shares has been authorized by the CNV pursuant to Resolution No. dated .
The Class B ordinary shares may be offered directly to the public in Argentina only through the Argentine placement agent, which is authorized under the laws and regulations of Argentina to offer or sell securities to the public in Argentina. The offering of the Class B ordinary shares in Argentina will be made by a prospectus in Spanish and in accordance with CNV regulations. The prospectus for the Argentine offering, although in a different format in accordance with CNV regulations, contains substantially the same information as contained in this prospectus.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, no offer of Class B ordinary shares or ADSs may be made to the public in that Relevant Member State at any time:
For the purposes of this provision, the expression of an "offer of Class B ordinary shares or ADSs to the public" in relation to any Class B ordinary shares or ADSs in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Class B ordinary shares or ADSs to be offered so as to enable an investor to decide to purchase or subscribe to the Class B ordinary shares or ADSs, as the same may be varied in that
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Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.
United Kingdom
This prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom, and any offer subsequently made may only be directed at persons who are "qualified investors" (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order") and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons") or otherwise in circumstances which have not resulted and will not result in an offer to the public of the Class B ordinary shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000.
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.
France
Neither this prospectus nor any other offering material relating to the Class B ordinary shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The Class B ordinary shares or ADSs have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:
(i) released, issued, distributed or caused to be released, issued or distributed to the public in France; or
(ii) used in connection with any offer for subscription or sale of the Class B ordinary shares or ADSs to the public in France.
Such offers, sales and distributions will be made in France only:
(i) to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d'investisseurs), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;
(ii) to investment services providers authorized to engage in portfolio management on behalf of third parties; or
(iii) in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l'épargne).
The Class B ordinary shares or ADSs may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
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Germany
This prospectus has not been prepared in accordance with the requirements for a securities or sales prospectus under the German Securities Prospectus Act (Wertpapierprospektgesetz), the German Sales Prospectus Act (Verkaufsprospektgesetz), or the German Investment Act (Investmentgesetz). Neither the German Federal Financial Services Supervisory Authority (Bundesanstalt für FinanzdienstleistungsaufsichtBaFin) nor any other German authority has been notified of the intention to distribute the Class B ordinary shares or ADSs in Germany. Consequently, the Class B ordinary shares or ADSs may not be distributed in Germany by way of public offering, public advertisement or in any similar manner and this prospectus and any other document relating to the offering, as well as information or statements contained therein, may not be supplied to the public in Germany or used in connection with any offer for subscription of the Class B ordinary shares or ADSs to the public in Germany or any other means of public marketing. The Class B ordinary shares or ADSs are being offered and sold in Germany only to qualified investors which are referred to in Section 3, paragraph 2 no. 1, in connection with Section 2, no. 6, of the German Securities Prospectus Act, Section 8f paragraph 2 no. 4 of the German Sales Prospectus Act, and in Section 2 paragraph 11 sentence 2 no. 1 of the German Investment Act. This prospectus is strictly for use of the person who has received it. It may not be forwarded to other persons or published in Germany.
The offering does not constitute an offer to sell or the solicitation or an offer to buy our Class B ordinary shares or ADSs in any circumstances in which such offer or solicitation is unlawful.
Italy
The offering of the Class B ordinary shares or ADSs has not been registered with the Commissione Nazionale per le Società e la Borsa (CONSOB), in accordance with Italian securities legislation. Accordingly, the Class B ordinary shares or ADSs may not be offered or sold, and copies of this prospectus or any other document relating to the Class B ordinary shares or ADSs may not be distributed in Italy except to Qualified Investors, as defined in Article 34-ter, subsection 1, paragraph b) of CONSOB Regulation no. 11971 of May 14, 1999, as amended (the Issuers' Regulation), or in any other circumstance where an express exemption to comply with public offering restrictions provided by Legislative Decree no. 58 of February 24, 1998 (the Consolidated Financial Act) or Issuers' Regulation applies, including those provided for under Article 100 of the Finance Law and Article 34-ter of the Issuers' Regulation, and provided, however, that any such offer or sale of the Class B ordinary shares or ADSs or distribution of copies of this prospectus or any other document relating to the Class B ordinary shares or ADSs in Italy must (i) be made in accordance with all applicable Italian laws and regulations; (ii) be conducted in accordance with any relevant limitations or procedural requirements that CONSOB may impose upon the offer or sale of the Class B ordinary shares or ADSs; and (iii) be made only by (a) banks, investment firms or financial companies enrolled in the special register provided for in Article 107 of Legislative Decree no. 385 of September 1, 1993, to the extent duly authorized to engage in the placement and underwriting of financial instruments in Italy in accordance with the Consolidated Financial Act and the relevant implementing regulations; or (b) foreign banks or financial institutions (the controlling shareholding of which is owned by one or more banks located in the same EU Member State) authorized to place and distribute Class B ordinary shares or ADSs in the Republic of Italy pursuant to Articles 15, 16 and 18 of the Banking Act, in each case acting in compliance with all applicable laws and regulations.
Netherlands
The Class B ordinary shares or ADSs may not, directly or indirectly, be offered or acquired in the Netherlands and this prospectus may not be circulated in the Netherlands, as part of an initial distribution or any time thereafter, other than to individuals or (legal) entities who or which qualify as
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qualified investors within the meaning of Article 1:1 of the Financial Supervision Act (Wet op het financieel toezicht) as amended from time to time.
Spain
The offering of the Class B ordinary shares or ADSs has not been and will not be registered with the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV) and, therefore, no Class B ordinary shares or ADSs may be offered, sold or distributed in any manner, nor may any resale of the Class B ordinary shares or ADSs be carried out in Spain except in circumstances which do not constitute a public offer of securities in Spain or are exempted from the obligation to publish a prospectus, as set forth in Spanish Securities Market Act (Ley 24/1988, de 28 de julio, del Mercado de Valores) and Royal Decree 1310/2005, of 4 November, and other applicable regulations, as amended from time to time, or otherwise without complying with all legal and regulatory requirements in relation thereto. Neither the prospectus nor any offering or advertising materials relating to the Class B ordinary shares or ADSs have been or will be registered with the CNMV and therefore they are not intended for the public offer of the Class B ordinary shares or ADSs in Spain.
Switzerland
The Class B ordinary shares or ADSs may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange or SIX or on any other stock exchange or regulated trading facility in Switzerland. This prospectus does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the Class B ordinary shares or ADSs or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to the Global Offering, to us, the Class B ordinary shares or ADSs have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of Class B ordinary shares or ADSs will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of Class B ordinary shares or ADSs has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of Class B ordinary shares or ADSs.
Canada
The Class B ordinary shares or ADSs may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted customers, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Class B ordinary shares or ADSs must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The
284
purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the international underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Brazil
The offer and sale of the Class B ordinary shares or ADSs will not be carried out by any means that would constitute a public offering in Brazil under Law No. 6,385, of December 7, 1976, as amended, and under CVM Rule (Instrução) No. 400, of December 29, 2003, as amended. The offer and sale of the Class B ordinary shares or ADSs has not been and will not be registered with the Comissão de Valores Mobiliários in Brazil. Any representation to the contrary is untruthful and unlawful. Any public offering or distribution, as defined under Brazilian laws and regulations, in Brazil is not legal without such prior registration. Documents relating to the offering of the Class B ordinary shares or ADSs, as well as information contained therein, may not be supplied to the public in Brazil, as the offering of Class B ordinary shares or ADSs is not a public offering of securities in Brazil, nor may they be used in connection with any offer for sale of the Class B ordinary shares or ADSs to the public in Brazil.
Any offer of the Class B ordinary shares or ADSs is addressed to the addressee personally, upon such addressee's request and for its sole benefit, and is not to be transmitted to anyone else, to be relied upon by anyone else or for any other purpose either quoted or referred to in any other public or private document or to be filed with anyone without the international underwriters' prior, express and written consent.
Chile
The Class B ordinary shares or ADSs are not registered in the Securities Registry (Registro de Valores) or subject to the control of the Chilean Securities and Exchange Commission (Superintendencia de Valores y Seguros de Chile). This prospectus and other offering materials relating to the offer of the Class B ordinary shares or ADSs do not constitute a public offer of, or an invitation to subscribe for or purchase, the Class B ordinary shares or ADSs in the Republic of Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Act (Ley de Mercado de Valores) (an offer that is not "addressed to the public at large or to a certain sector or specific group of the public").
Mexico
The Class B ordinary shares or ADSs have not been registered with the National Securities' Registry (Registro Nacional de Valores) maintained by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or CNBV), and may not be offered or sold publicly in Mexico.
This prospectus is not intended to be publicly distributed to an undetermined person through mass media, nor to serve as an application for the registration of the Class B ordinary shares or ADSs in Mexico, nor as a prospectus for their public offering in said jurisdiction.
This prospectus is addressed to you under a private offering exception contained in article 8 of the Securities Market Law (Ley del Mercado de Valores or LMV), for which you must comply with any of the following requirements:
(i) you are either an institutional or qualified investor for purposes of Mexican law;
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(ii) you are a member of a group of less than 100 individually identified people to whom the Class B ordinary shares or ADSs are being offered directly and personally; or
(iii) you are an employee of the issuer and a beneficiary of an employees' benefit plan of said issuer.
The LMV and CNBV regulations (along with other laws applicable in Mexico) define institutional investors as Mexican and foreign banks, broker dealers, insurance and bond companies, bonded warehouses, financial leasing companies, factoring companies and investment funds, private pension and annuities funds and foreign pension and investment funds. Such regulations also define qualified investors as individuals and corporations which maintain during the previous year investments in securities for an amount equal or similar to 1.5 million Mexican Unidades de Inversión or UDIS (approximately US$330,000) or that have obtained during the previous two years a gross income of at least 500,000 UDIS (approximately US$110,000) per year.
Hong Kong
The Class B ordinary shares or ADSs have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance.
No advertisement, invitation or document relating to the Class B ordinary shares or ADSs has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Class B ordinary shares or ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
WARNING: The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offering. If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Class B ordinary shares or ADSs may not be circulated or distributed, nor may the Class B ordinary shares or ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Class B ordinary shares or ADSs are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
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Notice to Prospective Investors in the Dubai International Financial Centre ("DIFC")
This prospectus relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for this prospectus. The Class B ordinary shares or ADSs to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Class B ordinary shares or ADSs offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you should consult an authorized financial advisor.
In relation to its use in the DIFC, this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the Class B ordinary shares or ADSs may not be offered or sold directly or indirectly to the public in foe DIFC.
Notice to Prospective Investors in the United Arab Emirates
Neither the Class B ordinary shares nor the ADSs have been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including foe Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
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The concept of money laundering is generally used to denote transactions intended to introduce criminal proceeds into the institutional financial system and thus to transform profits from illegal activities into assets of a seemingly legitimate origin.
On April 13, 2000, the Argentine Congress passed Law No. 25,246 (as amended, including by Laws No. 26,087; 26,119; 26,268, 26,683 and 26,734 which we refer to as the Anti-Money Laundering Law), which defines money laundering as a type of crime. In addition, the law, which supersedes several sections of the Argentine criminal code established severe penalties for anyone participating in any such criminal activity and created the Financial Information Unit (the FIU or UIF for its acronym in Spanish), establishing an administrative criminal system.
Below is a summary of certain provisions regarding the anti-money laundering regime as set forth by the Anti-Money Laundering Law, as amended and supplemented by other rules and regulations, including regulations issued by the UIF, the Central Bank, the CNV and other regulatory entities. Investors are advised to consult their own legal counsel and to read the Anti-Money Laundering Law and its statutory regulations. The UIF is the agency responsible for the analysis, treatment and transmission of information, with the aim of preventing money laundering resulting from different crimes and the financing of terrorism. The Argentine Criminal Code defines money laundering as a crime committed by any person who exchanges, transfers, manages, sells, levies, disguises or in any other way commercializes goods obtained through a crime, with the possible consequence of making the original assets or the substitute thereof appear to come from a lawful source, provided that their value exceeds AR$300,000 (approximately US$18,904 using the November 30, 2016 venta de divisas exchange rate of AR$15.87 to US$1.00 reported by the Banco de la Nación Argentina) whether such amount results from one or more related transactions. The penalties established for such activity are the following:
The Argentine Criminal Code also punishes any person who receives money or other assets from a criminal source with the purpose of applying them to a transaction thereby, making them appear to be from a lawful source.
In line with internationally accepted practices, the Anti-Money Laundering Law does not merely assign responsibility for controlling these criminal transactions to government agencies, but also assigns certain duties to various private sector entities such as banks, stockbrokers, brokerage houses and insurance companies, which become legally bound reporting parties. These duties primarily consist of information-capturing functions.
According to the Anti-Money Laundering Law, the following persons, among others, are subject to UIF reporting: (i) financial institutions and insurance companies; (ii) exchange agencies and individuals or legal entities authorized by the Argentine Central Bank to operate in the purchase and sale of foreign currency in the form of cash or checks drawn in foreign currency or by means of credit or debit cards or in the transfer of funds within Argentina or abroad; (iii) broker-dealers, companies managing
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investment funds, over-the-counter market agents, and intermediaries engaged in the purchase, lease, or borrowing of securities; (iv) armored transportation services companies and companies or concessionaires rendering postal services that carry out foreign currency transfers or remittance of different types of currency or notes; (v) governmental organizations, such as the Central Bank, the Argentine Tax Authority, the National Superintendency of Insurance (Superintendencia de Seguros de la Nación), the CNV and the IGJ; (vi) professionals in economics sciences and notaries public; and (vii) individuals and legal entities acting as trustees of any kind and individuals or legal entities related directly or indirectly to trust accounts, trustees and trustors under trust agreements.
Individuals and entities subject to the Anti-Money Laundering Law must comply with some duties that include: (i) obtaining documentation from their customers that irrefutably evidences their identity, legal status, domicile, and other data stipulated in each case (so-called know your customer policies); (ii) reporting any suspicious event or transaction (which according to the customary practices of the field involved, as well as to the experience and competence of the parties who have the duty to inform, are those transactions attempted or consummated that, having been previously identified as unusual transactions by the legally bound reporting party, or have no economic or legal justification or relations with the customer's risk or transactional profile or are unusually or unjustifiably complex, whether performed on a single occasion or repeatedly (regardless its amount)); and (iii) abstaining from disclosing to customers or third parties any act performed in compliance with the Anti-Money Laundering Law. Whenever the transactions are suspicious of money laundering such reports shall be made by the legally bound reporting parties within 30 (thirty days) as from the operation is qualified as suspicious and within the maximum term of 150 (one hundred fifty days) as from the day on which the transaction was made. In case they are suspicious of terrorist financing, the term is reduced to 48 (forty-eight) hours as from the date on which the transaction was made. Within the framework of analysis of a suspicious transaction report, the aforementioned individuals and entities cannot refrain from disclosing to the UIF any information required from it by claiming that such information is subject to bank, stock market or professional secrecy, or legal or contractual confidentiality agreements. The AFIP shall only disclose to UIF the information in its possession when the suspicious transaction report has been made by such entity and refers to the individuals or entities involved directly with the reported transaction. In all other cases the UIF shall request that the federal judge holding authority in a criminal matter order the AFIP to disclose the information in its possession.
Argentine financial institutions must comply with all applicable anti-money laundering regulations as provided by the Central Bank, the UIF, and, if applicable, the CNV. In this regard, in accordance with Resolution No. 229/2014 of the UIF, both the Central Bank and the CNV are considered "Specific Control Organs". In such capacity, they must cooperate with the UIF in the evaluation of the compliance with the anti-money laundering proceedings by the legally bound reporting parties subject to their control. In that respect, they are entitled to supervise, monitor and inspect such entities, and if necessary, to implement certain corrective measures and actions. Resolution 121/2011 issued by the UIF, as amended or supplemented by Resolutions No. 1/2012, 140/2012, 68/2013, 3/2014, 196/2015, 94/2016 and 104/2016 among others, which we refer to as Resolution 121, is applicable to financial entities subject to Law No. 21,526, to entities subject to Law No. 18,924, as amended, and to individuals and legal entities authorized by the Central Bank to intervene in the purchase and sale of foreign currency through cash or checks issued in foreign currency or through the use of credit or payment cards, or in the transfer of funds within or outside the national territory. Resolution No. 229/2011 of the UIF, as amended or supplemented by Resolutions No. 140/2012, 3/2014, 195/2015, 104/2016, 141/2016 and 4/2017 among others, which we refer to as Resolution 229, is applicable to brokers and brokerage firms, companies managing common investment funds, agents of the over-the-counter market, intermediaries in the purchase or leasing of securities affiliated with stock exchange entities with or without associated markets, and intermediary agents registered on forwards or option markets. Resolution 121 and Resolution 229 regulate, among other things, the obligation to
289
collect documentation from customers and the terms, obligations and restrictions for compliance with the reporting duty regarding suspicious money laundering and terrorism financing transactions.
Resolution 121 and Resolution 229 set forth general guidelines in connection with the customer's identification (including the distinction between occasional and regular customers), the information to be requested, the documentation to be filed and the procedures to detect and report suspicious transactions. Furthermore, Resolution No. 19/2016 established that these legally bound parties must implement a due diligence procedure based on a risk approach in order to comply with the "know your customer" policies.
The Central Bank and the CNV must also comply with anti-money laundering regulations set forth by the UIF, including reporting suspicious transactions. In particular, the Central Bank must comply with UIF Resolution No. 12/2011, as supplemented by, among other resolutions, Resolutions No. 1/2012 and No 92/2012, which, among other things, sets forth the Central Bank's obligation to evaluate the anti-money laundering controls implemented by Argentine financial institutions (with the limitation of access to the reports and records of suspicious operations, which are, as explained above, confidential and subject only to the UIF's supervision), and lists examples of what circumstances should be specifically considered in order to establish whether a particular transaction may be considered unusual and eventually qualified as suspicious.
Central Bank regulations require Argentine banks to take certain minimum precautions to prevent money laundering. Each institution must have an anti-money laundering committee, formed by a member of the board of directors and an officer responsible for anti-money laundering matters (oficial de cumplimiento). Additionally, as mentioned, each financial institution must appoint a member of the board of directors as the person responsible for money laundering prevention, in charge of centralizing any information the Central Bank may require on its own initiative or at the request of any competent authority and reporting any suspicious transactions to the UIF. Notwithstanding the officer's role as a liaison with the UIF, all board members have personal, joint, several and unlimited responsibility for the entity's compliance with its reporting duties with the UIF. In addition, this officer will be responsible for the implementation, tracking and control of internal procedures to ensure compliance with the regulations in financial institutions and its subsidiaries.
In addition, pursuant to Communique "A" 5738 (as amended and supplemented) of the Central Bank, Argentine financial institutions must comply with certain additional "know your customer policies". In this sense, pursuant to such Communication, under no circumstance may new commercial relationships be initiated if the "know your customer policies" and the risk management legal standards have not been complied with. In addition, in respect of the existing customers: if the "know your customer policies" could not be complied with, the Argentine financial institution must analyze the continuance of the commercial relationship with such client using a risk-based approach. In case the operations with the client are discontinued, the termination of the relationship must be implemented in accordance with Central Bank's regulations for each type of product. Operations do not have to be discontinued when the "know your customer" policies are complied with in such period or when simplified due diligence procedures were implemented pursuant to applicable laws. Furthermore, pursuant to this Communication, Argentine financial entities must keep the documentation related to the discontinuance for ten years and include in their prevention manuals the detailed procedures to initiate and discontinue operations with customers in accordance with the above-mentioned additional "know your customer policies" implemented.
The CNV Rules (as amended in September 2013) include a specific chapter regarding the "Prevention of Money Laundering and the Financing of Terrorism" and state that the persons set forth therein (negotiation agents, clearing and settlement agents such as (such as stockbrokers), distribution and placement agents, manager and custody agents of collective investment funds, brokerage agents, collective depositary agents, issuers with respect to capital contributions, irrevocable capital
290
contributions for future capital increases or significant loans that have been made in its benefit, specifically with respect to the identity of contributors and/or creditors and the origin and legality of the funds so contributed or loaned) are to be considered legally bound reporting parties under the Anti-Money Laundering Law, and therefore must comply with all the laws and regulations in force in connection with anti-money laundering and terrorism financing, including resolutions issued by the UIF, presidential decrees referring to resolutions issued by the United Nations Security Council in connection with the fight against terrorism and the resolutions (and its annexes) issued by the Ministry of Foreign Affairs. In addition, CNV Rules impose certain restrictions in connection with payment arrangements (limiting, among other things, the cash amount that the entities set forth therein could receive or pay per day and per client, to AR$1,000) and impose certain reporting obligations.
In addition, the CNV Rules establish that the above-mentioned entities shall only be able to carry out any transactions contemplated under the public offering system, when such transactions are carried out or ordered by persons organized, domiciled or resident in dominions, jurisdictions, territories or associated States included in the cooperating countries list contained in Executive Decree No. 589/2013, section 2(b). When such persons are not included in such list and in their home jurisdiction qualify as registered intermediaries in an entity under control and supervision of a body that carries out similar functions to those carried out by the CNV, they will only be allowed to carry out such transactions if they provide evidence indicating that the relevant securities and exchange commission in their home jurisdiction has signed a memorandum of understanding for cooperation and exchange of information with the CNV.
Recently, the "National Coordination Program for the Prevention of Asset Laundering and the Financing of Terrorism" was created by Executive Decree No. 360/2016 as an instrument of the Ministry of Justice and Human Rights. This Program was assigned the duty to reorganize, coordinate and strengthen the national system for the prevention of money laundering and the financing of terrorism, taking in consideration the specific risks that might have an impact on Argentine territory and the global demand for a more effective compliance with international obligations and recommendations established under United Nations Conventions and the standards of the Financial Action Task Force, or FATF. These duties will be performed and implemented through a National Coordinator appointed for this purpose. Also, applicable statutory rules were modified, and it was established that the Ministry of Justice and Human Rights will be the federal government's central authority in charge of the inter-institutional coordination among all public and private agencies and entities with competent jurisdiction on this matter, while the UIF will retain the ability to perform operating coordination activities at the national, provincial and municipal levels in relation to matters strictly inherent in its jurisdiction as a financial intelligence agency.
Also, in accordance with the approval of Law No. 27,260, the UIF issued Resolution No. 92/2016, which establishes the obligation for legally bound reporting parties to implement a risk-management system according to the "voluntary and exceptional system of declaration of holding of National currency, foreign currency and other assets in the country and abroad". Thus, in the case of detecting suspicious transactions made by their customers through March 31, 2017, in the context of the above-mentioned legal regime, they shall report such transactions through the agency's website (www.argentina.gob.ar/uif) in the section called "ros sf", referring to the report of suspicious transactions taking place under the fiscal amnesty regime. This "ros" must be duly founded and contain a description of the circumstances in which the transaction is considered to be suspicious in the framework of the tax amnesty regime and reveal an adequate analysis of the operation and the profile of the customer (in this case, the requirements related to tax information and tax documentation for the identification of the customer are not deemed necessary).
For an extensive analysis of the money laundering regime in effect as of the date of this prospectus, investors should consult legal counsel and read Title XIII, Book 2 of the Argentine Criminal Code and any regulations issued by the UIF, the CNV and the Central Bank in their entirety. For such purposes, interested parties may visit the websites of the Argentine Ministry of Economy and Public Finance, at www.infoleg.gov.ar, the UIF, at https://www.argentina.gob.ar/uif, the CNV, at www.cnv.gob.ar, or the Central Bank, at www.bcra.gov.ar. The information found on such websites is not a part of this prospectus.
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ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of Argentina. The majority of our directors and all our officers and certain advisors and the selling shareholders named herein reside in Argentina or elsewhere outside the United States. Substantially all of our assets and those of the selling shareholders are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to force against them or against us judgments predicated upon the civil liability provisions of the U.S. federal securities laws or the laws of such other jurisdictions.
We have been advised by our Argentine counsel, Marval, O'Farrell & Mairal, that there is doubt as to the enforceability to the same extent and in as timely a manner as a U.S. or other non-Argentine court, in original actions in Argentine courts, of liabilities predicated solely upon the federal securities laws of the United States and as to the enforceability in Argentine courts of judgments of United States courts obtained in actions against us predicated upon the civil liability provisions of the federal securities laws of the United States that will be subject to compliance with certain requirements under Argentine law mentioned below, including the condition that any such judgment does not violate Argentine public policy (orden público).
Foreign judgments would be recognized and enforced by the courts in Argentina according to international treaties between Argentina and the country where the judgment was rendered. In the absence of a treaty, the following requirements of Article 517 of the National Civil and Commercial Procedure Code (if enforcement is sought before federal courts) would apply: (i) the judgment, which must be final in the jurisdiction where rendered, must have been issued by a court with jurisdiction in accordance with Argentine principles regarding international jurisdiction; (ii) the judgment must result from a personal action, or an in rem action with respect to personal property if such was transferred to Argentine territory during or after the prosecution of the foreign action; (iii) the defendant against whom enforcement of the judgment is sought must have been duly served with the summons and, in accordance with due process of law, given an opportunity to defend against foreign action; (iv) the judgment must be valid in the jurisdiction where rendered, its authenticity must be established in accordance with the requirements of Argentine law, (v) the judgment must not violate the principles of public policy of Argentine law, and (vi) the judgment must not be contrary to a prior or simultaneous judgment of an Argentine court. Reciprocity is not required for an Argentine court to recognize a foreign judgment.
Pursuant to Article 519 bis of the National Civil and Commercial Procedure Code, awards issued by foreign arbitral tribunals can be enforced in Argentina following the procedure established for the enforcement of foreign judgments, provided that: (i) the applicable requirements of Article 517 are met; (ii) the waiver by a foreign Court of its jurisdiction is not prohibited by law; and (iii) the matter debated in the case may be subjected to arbitration.
Subject to compliance with Article 517 of the National Civil and Commercial Procedure Code described above, a judgment against us, any Argentine selling shareholder or the persons described above obtained outside Argentina would be enforceable in Argentina without reconsideration of the merits. Notwithstanding, a judgment's recognition and enforcement in Argentina may be denied by Argentine courts in light of the March 6, 2014 decision of the Supreme Court of Argentina in Claren Corporation vs. Estado Nacional. In that case, the plaintiff was a bondholder which sought to recognize a U.S. judgment against the federal government. The Supreme Court of Argentina held that enforcing such judgment violated Argentine law principles of public policy. It further stated that granting the enforcement would imply that a plaintiff, through an individual action filed before a foreign court, would be able to circumvent the public debt restructuring process set forth by the federal government through emergency legislation enacted in accordance with the Argentine Constitution.
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We are being represented by Milbank, Tweed, Hadley & McCloy LLP with respect to matters of United States federal securities and New York State law. The underwriters are being represented by Simpson Thacher & Bartlett LLP with respect to matters of United States federal securities and New York State law and Perez Alati, Grondona, Benites, Arntsen & Martínez de Hoz (h) with respect to matters of Argentine law. The office of Perez Alati, Grondona, Benites, Arntsen & Martínez de Hoz (h) is located at Suipacha 1111, 18th floor, Buenos Aires, Argentina. The validity of the rights, Class B ordinary shares and other matters governed by Argentine law will be passed upon for us by Marval, O'Farrell & Mairal. The office of Marval, O'Farrell & Mairal is located at Ave. Leandro N. Alem 882 C1001AAQ, Buenos Aires, Argentina.
The financial statements as of November 30, 2016, 2015 and 2014 and December 1, 2013 and for the three years ended in the period ended November 30, 2016 included in this prospectus have been so included in reliance on the report of Price Waterhouse & Co. S.R.L., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
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EXPENSES RELATED TO THE GLOBAL OFFERING
The following table sets forth the main expenses related to the Global Offering, other than the underwriting discounts and commissions, which we will be required to pay:
|
Amount To Be Paid |
Percentage of Amount with Respect to the Offering |
|||||
---|---|---|---|---|---|---|---|
SEC registration fee |
US$ | ||||||
NYSE listing fee |
US$ | ||||||
FINRA filing fee |
US$ | ||||||
Bolsas y Mercados Argentinos S.A. listing fee |
US$ | ||||||
Printing and engraving expenses |
US$ | ||||||
Legal fees and expenses |
US$ | ||||||
Accounting fees and expenses |
US$ | ||||||
Underwriting fees |
US$ | ||||||
Transfer agent and registrar fees |
US$ | ||||||
Taxes |
US$ | ||||||
Applicable Directors and Officers Insurance Premiums |
US$ | ||||||
Miscellaneous |
US$ | ||||||
| | | | | | | |
Total |
US$ | ||||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Each of the amounts set forth above, other than the SEC registration fee, the FINRA filing fee and the NYSE listing fee, is an estimate. These expenses will be borne by .
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INDEX TO THE FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
To Shareholders of Molino Cañuelas S.A.C.I.F.I.A.
In our opinion, the accompanying consolidated combined statements of financial position and the related consolidated combined statements of comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of Molino Cañuelas S.A.C.I.F.I.A. and its subsidiaries and combined entities at November 30, 2016, 2015, 2014 and December 1, 2013, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board . These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Price Waterhouse & Co. S.R.L.
/s/ MARCELO DE NICOLA |
||
Marcelo de Nicola Partner |
Buenos Aires, Argentina
March 27, 2017, except for the effects of the acquisition of packaging business of Cañuelas Pack S.A. described in Note 1.2, as to which the date is April 1,
2017.
F-2
Denomination: Molino Cañuelas S.A.C.I.F.I.A.
Legal address:
Registered office: John F. Kennedy 160CañuelasProvincia de Buenos AiresRepública Argentina
Company activity: | Production of wheat flour and by-products Industrialization of oil Production of cookies and pasta |
Date of registration: August 7, 1970
Expiration of company charter: August 7, 2069
Number of register in Dirección Provincial de Personal Jurídicas de la
Provincia de Buenos Aires: 11,978
Capital stock: 12,000,000 shares (Note 31)
F-3
Molino Cañuelas S.A.C.I.F.I.A.
Consolidated Combined Statements of Comprehensive Income
for the years ended November 30, 2016, 2015 and
2014
(All amounts in thousands of Argentine pesos, except shares and per share data, and as otherwise indicated)
|
Notes | Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales |
21 | 32,317,700 | 22,134,392 | 19,821,199 | ||||||||
Cost of sales |
22 | (25,082,087 | ) | (17,188,962 | ) | (15,667,852 | ) | |||||
| | | | | | | | | | | | |
Margin Before Operating Expenses |
7,235,613 | 4,945,430 | 4,153,347 | |||||||||
Selling expenses |
23 | (4,418,472 | ) | (3,546,987 | ) | (2,967,422 | ) | |||||
Administrative expenses |
23 | (827,287 | ) | (510,605 | ) | (443,732 | ) | |||||
Other operating income, net |
24 | 10,882 | 27,637 | 24,088 | ||||||||
| | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
2,000,736 | 915,475 | 766,281 | |||||||||
Financial income |
25 | 323,429 | 230,221 | 267,655 | ||||||||
Financial costs |
25 | (1,070,446 | ) | (687,128 | ) | (506,041 | ) | |||||
Exchange differences, net |
25 | (1,448,401 | ) | (398,464 | ) | (311,690 | ) | |||||
| | | | | | | | | | | | |
Financial results, net |
(2,195,418 | ) | (855,371 | ) | (550,076 | ) | ||||||
Gain on acquisition of businesses |
30 | 1,084,327 | | | ||||||||
Profit Before Income Tax |
889,645 | 60,104 | 216,205 | |||||||||
Income tax expense |
20 | (25,263 | ) | (48,173 | ) | (68,396 | ) | |||||
| | | | | | | | | | | | |
Profit for the Year |
864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Profit Attributable to: |
||||||||||||
Equity holders of the parent |
864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | |
Total |
864,382 | 11,931 | 147,809 | |||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Adjusted average number of ordinary shares outstanding |
31 | 150,000,000 | 150,000,000 | 150,000,000 | ||||||||
Profit per share attributable to equity holders |
26 | 5.76 | 0.08 | 0.99 | ||||||||
Other Comprehensive Income |
||||||||||||
Items that may be reclassified to profit or loss |
||||||||||||
Exchange difference on translation of foreign operations |
175,444 | 19,564 | 71,072 | |||||||||
Items that will not be reclassified to profit or loss |
||||||||||||
Revaluation of property, plants and equipment |
2,929,983 | 915,093 | 1,029,368 | |||||||||
Income tax expense |
(1,028,497 | ) | (320,531 | ) | (360,525 | ) | ||||||
| | | | | | | | | | | | |
Total Other Comprehensive Income |
2,076,930 | 614,126 | 739,915 | |||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total Comprehensive Income |
2,941,312 | 626,057 | 887,724 | |||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated combined financial statements.
F-4
Molino Cañuelas S.A.C.I.F.I.A.
Consolidated Combined Statements of Financial Position
as of November 30, 2016, 2015, 2014 and
December 1, 2013
(All amounts in thousands of Argentine pesos, except otherwise indicated)
|
Notes | Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Dec 1, 2013 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-Current Assets |
||||||||||||||||
Property, plant and equipment, net |
6 | 11,714,621 | 5,348,675 | 4,160,354 | 2,639,214 | |||||||||||
Investment property, net |
7 | 54,494 | 72,626 | 70,337 | 577 | |||||||||||
Intangible assets, net |
8 | 114,471 | 14,359 | 15,820 | 9,957 | |||||||||||
Investments in associates |
9 | | | 653 | 443 | |||||||||||
Deferred income tax assets |
20 | 34,350 | 18,478 | 21,232 | 6,519 | |||||||||||
Other investments |
15 | 133 | 235 | 83 | ||||||||||||
Other receivables, net |
12 | 359,790 | 78,569 | 61,313 | 101,996 | |||||||||||
Trade receivables, net |
12 | | 4,439 | | | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Assets |
12,277,741 | 5,537,279 | 4,329,944 | 2,758,789 | ||||||||||||
Current Assets |
||||||||||||||||
Inventories |
13 | 2,490,685 | 1,538,785 | 1,292,022 | 832,855 | |||||||||||
Other receivables, net |
12 | 1,126,326 | 903,022 | 517,126 | 495,189 | |||||||||||
Trade receivables, net |
12 | 5,592,599 | 4,382,579 | 2,846,578 | 2,140,152 | |||||||||||
Other investments |
| | 109 | 1,724 | ||||||||||||
Financial assets at fair value |
10 | | 26,158 | 23,015 | 17,580 | |||||||||||
Derivatives |
11 | 315,164 | 211,321 | 158,633 | 69,471 | |||||||||||
Cash and cash equivalents |
14 | 3,794,667 | 943,731 | 1,121,351 | 865,445 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Assets |
13,319,441 | 8,005,596 | 5,958,834 | 4,422,416 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total Assets |
25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Shareholders' Equity |
||||||||||||||||
Common stock |
12,000 | 12,000 | 12,000 | 12,000 | ||||||||||||
Additional paid-in capital |
25,414 | 25,414 | 25,414 | 25,414 | ||||||||||||
Reserves |
4,717,491 | 2,640,561 | 2,026,435 | 1,286,520 | ||||||||||||
Retained earnings |
744,815 | 471,812 | 477,881 | 329,995 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total Equity |
5,499,720 | 3,149,787 | 2,541,730 | 1,653,929 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Liabilities |
||||||||||||||||
Non-Current Liabilities |
||||||||||||||||
Borrowings |
16 | 6,234,323 | 1,215,844 | 1,224,210 | 620,550 | |||||||||||
Deferred income tax liabilities |
20 | 2,747,057 | 1,251,968 | 982,175 | 643,322 | |||||||||||
Trade and other payables |
18 | 189,041 | 13,850 | 72,760 | 13,498 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Non-Current Liabilities |
9,170,421 | 2,481,662 | 2,279,145 | 1,277,370 | ||||||||||||
Current Liabilities |
||||||||||||||||
Borrowings |
16 | 4,144,725 | 3,898,992 | 2,128,053 | 2,235,964 | |||||||||||
Current income tax payable |
103,828 | 1,563 | 10,148 | 27,659 | ||||||||||||
Provisions |
19 | 67,789 | 27,649 | 13,600 | 10,212 | |||||||||||
Derivatives |
11 | 1,154 | 1,365 | 27,479 | 1,310 | |||||||||||
Trade and other payables |
18 | 6,609,545 | 3,981,857 | 3,288,623 | 1,974,761 | |||||||||||
| | | | | | | | | | | | | | | | |
Total Current Liabilities |
10,927,041 | 7,911,426 | 5,467,903 | 4,249,906 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total Liabilities |
20,097,462 | 10,393,088 | 7,747,048 | 5,527,276 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total Equity and Liabilities |
25,597,182 | 13,542,875 | 10,288,778 | 7,181,205 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated combined financial statements.
F-5
Molino Cañuelas S.A.C.I.F.I.A.
Consolidated Combined Statements of Changes in Equity for the years ended November 30, 2016, 2015 and 2014
(All amounts in thousands of Argentine pesos, except otherwise indicated)
|
Common Stock |
Additional Paid in Capital |
Legal Reserve |
Revaluation Surplus |
Foreign Exchange Conversion |
Retained Earnings |
Total Shareholder' Equity |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 1, 2013 |
12,000 | 25,414 | 7,482 | 1,279,038 | | 329,995 | 1,653,929 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Profit for the year |
| | | | | 147,809 | 147,809 | |||||||||||||||
Other comprehensive income for the year |
| | | 668,843 | 71,072 | | 739,915 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income for the year |
| | | 668,843 | 71,072 | 147,809 | 887,724 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Transactions with owners in their capacity as owners |
||||||||||||||||||||||
Capital increases in combined entities |
| | | | | 77 | 77 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
| | | | | 77 | 77 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance at November 30, 2014 |
12,000 | 25,414 | 7,482 | 1,947,881 | 71,072 | 477,881 | 2,541,730 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Profit for the year |
| | | | | 11,931 | 11,931 | |||||||||||||||
Other comprehensive income for the year |
| | | 594,562 | 19,564 | | 614,126 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income for the year |
| | | 594,562 | 19,564 | 11,931 | 626,057 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Transactions with owners in their capacity as owners |
||||||||||||||||||||||
Cash dividends declared by Shareholders' Meeting on March 20, 2015. $1.33 per share |
| | | | | (16,000 | ) | (16,000 | ) | |||||||||||||
Cash dividends declared in combined entities by Shareholders' Meeting on August 31, 2015. $0.17 per share |
| | | | | (2,000 | ) | (2,000 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
| | | | | (18,000 | ) | (18,000 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance at November 30, 2015 |
12,000 | 25,414 | 7,482 | 2,542,443 | 90,636 | 471,812 | 3,149,787 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Profit for the year |
| | | | | 864,382 | 864,382 | |||||||||||||||
Other comprehensive income for the year |
| | | 1,901,486 | 175,444 | | 2,076,930 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income for the year |
| | | 1,901,486 | 175,444 | 864,382 | 2,941,312 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Transactions with owners in their capacity as owners |
||||||||||||||||||||||
Withdrawals |
| | | | | (310,099 | ) | (310,099 | ) | |||||||||||||
Cash dividends declared by Shareholders' Meeting on February 24, 2016. $5.67 per share |
| | | | | (68,000 | ) | (68,000 | ) | |||||||||||||
Cash dividends declared in combined entity by Shareholders' Meeting on August 29, 2016. $1.11 per share |
| | | | | (13,280 | ) | (13,280 | ) | |||||||||||||
Cash dividends declared in combined entity by Shareholders' Meeting on November 29, 2016. $16.67 per share |
| | | | | (200,000 | ) | (200,000 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
| | | | | (591,379 | ) | (591,379 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance at November 30, 2016 |
12,000 | 25,414 | 7,482 | 4,443,929 | 266,080 | 744,815 | 5,499,720 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated combined financial statements.
F-6
Molino Cañuelas S.A.C.I.F.I.A.
Consolidated Combined Statements of Cash Flows
for the years ended November 30, 2015 and 2014
(All amounts in thousands of Argentine pesos, except otherwise indicated)
|
Notes | Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Change in cash and cash equivalents |
||||||||||||
Cash and cash equivalents at beginning of year |
14 | 943,731 | 1,121,351 | 865,445 | ||||||||
Cash and cash equivalents at end of year |
14 | 3,794,667 | 943,731 | 1,121,351 | ||||||||
Net increase/(decrease) in cash and cash equivalents |
2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | |
Cash flows from operating activities: |
||||||||||||
Profit for the year |
864,382 | 11,931 | 147,809 | |||||||||
Income tax expense |
25,263 | 48,173 | 68,396 | |||||||||
Adjustments for: |
||||||||||||
Depreciation |
6 | 265,496 | 172,574 | 120,190 | ||||||||
Amortization |
8 | 10,527 | 4,567 | 2,424 | ||||||||
Change in fair value adjustment in derivatives |
11 | (104,054 | ) | (78,803 | ) | (62,992 | ) | |||||
Provisions |
19 | 40,140 | 14,049 | 3,388 | ||||||||
Bad debt accrual |
12 | 30,251 | 1,261 | 13,906 | ||||||||
Results from sale of equity investments |
(4,310 | ) | (13,875 | ) | | |||||||
Gain on acquisition of businesses |
30 | (1,084,327 | ) | | | |||||||
Results from sale of property, plant and equipment |
24 | (2,271 | ) | (4,852 | ) | (940 | ) | |||||
Net interest accrued |
25 | 747,017 | 456,907 | 238,386 | ||||||||
Net exchange differences accrued and not paid |
1,355,250 | 36,607 | 37,591 | |||||||||
Interest collected |
314,460 | 228,606 | 264,711 | |||||||||
Income tax paid |
(50,014 | ) | (80,686 | ) | (54,544 | ) | ||||||
Change in operating assets and liabilities |
||||||||||||
Increase in Inventories |
(731,347 | ) | (246,763 | ) | (459,167 | ) | ||||||
Increase in Accounts receivable |
(1,710,106 | ) | (1,943,592 | ) | (687,680 | ) | ||||||
Increase in Accounts payable |
2,572,380 | 632,524 | 1,373,124 | |||||||||
Change in other operating assets and liabilities, net |
(11,742 | ) | (49,608 | ) | (117,643 | ) | ||||||
| | | | | | | | | | | | |
Net cash generated from (used in) operating activities |
2,526,995 | (810,980 | ) | 886,959 | ||||||||
| | | | | | | | | | | | |
Investing activities |
||||||||||||
Purchases of property, plant and equipment |
6 | (1,284,842 | ) | (419,393 | ) | (563,511 | ) | |||||
Purchases of investment property |
7 | (6,100 | ) | (2,468 | ) | (69,609 | ) | |||||
Purchases of intangible assets |
8 | (2,479 | ) | (3,129 | ) | (6,801 | ) | |||||
Sales of property, plant and equipment |
21,670 | 17,653 | 36,423 | |||||||||
Acquisition of business |
30 | (736,190 | ) | | | |||||||
Sales of related companies |
43,095 | 14,573 | | |||||||||
Other investments |
| (492 | ) | 507 | ||||||||
| | | | | | | | | | | | |
Net cash used in investing activities |
(1,964,846 | ) | (393,256 | ) | (602,991 | ) | ||||||
| | | | | | | | | | | | |
Financing activities |
||||||||||||
Loans paid |
(11,250,069 | ) | (3,999,372 | ) | (3,553,332 | ) | ||||||
Borrowings |
14,776,968 | 5,698,424 | 3,983,752 | |||||||||
Interest paid |
(1,045,344 | ) | (655,479 | ) | (504,329 | ) | ||||||
Withdrawals |
(310,099 | ) | | 77 | ||||||||
Dividends paid |
(74,200 | ) | (16,200 | ) | | |||||||
| | | | | | | | | | | | |
Net cash generated from (used in) financing activities |
2,097,256 | 1,027,373 | (73,832 | ) | ||||||||
Foreign exchange (losses)/gains on cash and cash equivalents |
191,531 |
(757 |
) |
45,770 |
||||||||
| | | | | | | | | | | | |
Net increase/(decrease) in cash and cash equivalents |
2,850,936 | (177,620 | ) | 255,906 | ||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Non-cash investing and financing activities |
||||||||||||
Acquisition of property, plant and equipment by finance lease |
| 2,971 | 2,414 | |||||||||
Dividends declared not paid |
207,080 | 1,800 | |
The accompanying notes are an integral part of these consolidated combined financial statements.
F-7
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements
(All amounts in thousands of Argentine pesos, except
otherwise indicated)
1. Formation of the Group and general information
1.1. The Group
Molino Cañuelas S.A.C.I.F.I.A. (hereinafter referred to as the "Company") together with the other Combined Entities described below (hereinafter and together with the Company referred to as the "Group") is a leading Argentine reference brand consumer food products and food production company, which is vertically integrated and has a leading presence in Argentina and Uruguay and has growing operations in Brazil, Chile and Bolivia. The Group is also one of the leading manufacturers and providers of reference brand consumer foods products and semi-processed primary food products in South America. The Group is contemplating a concurrent initial public offering (IPO) of its share capital in the United States of America and Argentina.
1.2. Description of the reorganization
During the year ended November 30, 2016 and subsequent to year-end but prior to the effectiveness of the IPO, the Company acquired certain entities and/or businesses that were under common control of the Company's existing shareholders, as follows:
F-8
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
1. Formation of the Group and general information (Continued)
Total aggregate consideration for the above acquisitions amounts to approximately $7,800 million. As of November 30, 2016 the Company paid $310 million. The remaining impact of consideration made in connection with the acquisitions that will not occur until after the fiscal year ended November 30, 2016, were not reflected in the consolidated combined statements of financial position and in the Consolidated Combined Statements of Changes in Equity as of and for the year ended November 30, 2016. An additional $7.116 million was disbursed between December 2016 and February 2017. The remaining balance will be paid between March and May 2017.
These transactions were accounted for under the predecessor value method, as permitted under International Financial Reporting Standards ("IFRS"), as adopted by the International Accounting Standards Board. Under the predecessor value method, the results and financial positions of the acquired entities and businesses were combined and consolidated with and into the Company's own operations as from the first day of the earliest period presented in the financial statements as if these entities and businesses had always been part of the Group. There are no higher entities that prepare consolidated financial statements within the Group. Balances from intercompany transactions were eliminated.
1.3. Other acquisition
As further described in Note 30.3 on August 31, 2016 the Company acquired Cargill's milling business in Argentina for a total consideration of $736 million. This acquisition has been accounted for under the purchase method of accounting described in note 2.4.3.
1.4. Principal carve-out allocations of business combined
As described above the Company acquired certain assets and activities related to the port operations of MOLCA S.A. The acquisition did not include the port facilities and other real estate property of MOLCA S.A. In order to reflect all costs of doing business, the consolidated combined income statement includes a charge representing the cost that the Group would have incurred for use of such port facilities, at market rates, should a lease agreement been in place for all periods presented. This charge amounting to USD 1.5 million per year, equals the amount of the current, post-Reorganization contract relating to these facilities, is shown as an operating lease payment in all periods presented.
The CAGSA acquisition described in note 1.2 did not consider certain assets and liabilities that the seller retained. Nevertheless, such assets and liabilities and their historical impact to profit or loss, that
F-9
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
1. Formation of the Group and general information (Continued)
were necessary and relevant to the historical financial information of the Company as a combined legal entity, were reflected in the historical consolidated combined financial statements.
The Company considered the following carve-out adjustments to reflect all costs of doing business:
1.5. Other information
The composition of the capital stock of the Company is as follows:
Ordinary Shares
|
Number of shares | Fully paid shares | |||||
---|---|---|---|---|---|---|---|
Class "A" par value $11 Vote |
12,000,000 | 12,000,000 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The evolution of the capital stock is as follows:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Capital stock at the beginning of the year |
12,000,000 | 12,000,000 | 12,000,000 | |||||||
Capital stock at year end |
12,000,000 | 12,000,000 | 12,000,000 |
On February 14, 2017, the Company's shareholder meeting approved a capitalization of retained earnings and a 10-for-1 stock split (Note 31.1).
The Group is controlled by the Navilli Family (the "principal shareholders") who hold 100% of the share capital of each of the combined entities.
F-10
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
1. Formation of the Group and general information (Continued)
These consolidated combined financial statements were approved for issuance by the Company's Board of Directors on February 27, 2017.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated combined financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1. Basis of preparation and transition to IFRS
The Group's consolidated combined financial statements have been prepared in accordance with IFRS and interpretations as issued by the IASB. All IFRS issued by the IASB, effective at the time of preparing these combined financial statements have been applied. In addition, certain IFRS which are not effective as of November 30, 2016 but permit earlier adoption have been applied.
IFRS provides no guidelines for the preparation of combined financial statements, which are therefore subject to the rules given in International Accounting Standards (IAS) 8.12. This paragraph requires consideration of the most recent pronouncements of other standard-setting bodies, other financial reporting requirements and recognized industry practices.
The Group has applied IFRS for the first time for the year ended November 30, 2016 with a transition date of December 1, 2013. The following paragraphs contain the details of the Group's transition to IFRS and application of IFRS 1 "First Time Adoption of IFRS".
The application of IFRS 1 required that the Group adopt accounting policies based on the standards and related interpretations effective at the reporting date of its first annual IFRS financial statements. These accounting policies were applied as of the date of transition to IFRS and throughout all periods presented in the first IFRS consolidated combined financial statements.
In accordance with IFRS 1, assets and liabilities were recognized and measured in accordance with those IFRSs required to be applied as of December 1, 2013. The group did not use any of the mandatory exceptions and optional exemptions to full retrospective application of IFRS set out within IFRS 1.
IFRS 1 requires that an entity explain how the transition from previous generally accepted accounting principles (GAAP) to IFRSs affected its reported financial position, financial performance and cash flows. As the combined Group neither prepared nor reported a complete set of financial statements in the past, these reconciliations from previous GAAP to IFRS were not required.
Presentation in the consolidated combined statement of financial position differentiates between current and non-current assets and liabilities. Assets and liabilities are regarded as current if they mature within one year or within the normal business cycle of the Group, or are held for sale.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated combined financial statements are disclosed in Note 4.
F-11
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
Additionally, the Group has applied the first phase of IFRS 9 "Financial Instruments" at the transition date.
Several balance sheet and income statement items have been combined in the interests of clarity. These items are stated and explained separately in the notes to the consolidated combined financial statements. The income statement is structured according to the function of expense method (nature of the expenses is classified in notes).
The consolidated combined financial statements are presented in thousands of Argentine pesos unless otherwise stated. All amounts are rounded off to thousands of pesos unless otherwise stated. As such, insignificant rounding differences may occur. A dash ("") indicates that no data was reported for a specific line item in the relevant financial year or period or when the pertinent figure, after rounding, amounts to nil.
The fiscal year begins on December 1 and ends on November 30 of the following year.
2.2. New accounting standards
The following standards, amendments and interpretations have been issued by the IASB and IFRIC, but they are not effective and have not been adopted early by the Group in these consolidated combined financial statements:
IAS 7 "Statement of Cash Flows": In February 2016, the IASB issued certain amendments regarding disclosures to be made in the Statement of Cash Flow.
Modifications to the Disclosure Initiative (Amendments to IAS 7) are intended to disclose information to enables users of financial statements to evaluate changes in liabilities arising from financing activities. For this, the IASB requires that the following changes in liabilities arising from financing activities be disclosed: (i) changes in the cash flows from financing activities; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in exchange rate variation; (iv) changes in fair values; and (v) other changes. Finally, the amendments state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.
These changes will become effective for annual periods beginning on or after January 1, 2017, with early adoption permitted.
IFRS 16 "Leases": In January 2016, the IASB issued IFRS 16 "Leases" which establishes the new model for the registration of leasing transactions. This norm repeals the current guidelines for accounting for such transactions in IAS 17 "Leases" and related interpretations when it becomes effective. IFRS 16 is applicable for annual periods beginning on or from January 1, 2019, with early adoption permitted.
IAS 12 "Income Taxes": In January 2016, the IASB issued certain amendments related to the recognition of deferred tax assets for unrealized losses. These changes will be effective for annual periods beginning on or after January 1, 2017, with early adoption permitted.
IFRS 15 "Revenue from contracts with customers" In May 2014, the IASB issued IFRS 15, which was amended in April 2016. This norm is applicable for annual periods beginning January 1, 2018. It
F-12
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
specifies how and when revenue is recognized, as well as the additional information that must be presented in the financial statements. The standard provides a unique five-step model based on principles that apply to all contracts with customers. At this stage, the Group is performing the full assessment of IFRS 15 impact, standard that will be effective for the annual period ending November 30, 2019.
IFRS 9 "Financial Instruments": In July 2014, the IASB issued an amendment to IFRS 9. It includes in one place all phases of the IASB project to replace IAS 39 "Financial Instruments: Recognition and Measurement". These phases are the classification and measurement of instruments, impairment and hedge accounting. This version adds a new impairment model based on expected losses and some minor modifications to the classification and measurement of financial assets. The new standard replaces all previous versions of IFRS 9 and is effective for periods beginning on or after 1 January 2018. At the transition date, the Group has adopted the first phase of IFRS 9 and is currently analyzing the impact of the second and third phases.
IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture": In June 2014, the IASB issued an amendment to IAS 16 and IAS 41. The amendment introduced modifications to the registration model of "production facilities" which must be accounted for similarly to elements of property, plant and equipment, their schemes comparable productive operation. The "production facilities" are defined as living plantations that are used in the production or supply of agricultural products, for over a year and with remote chances of being sold or marketed as agricultural products. Those amendments require that the "production plants" are recorded as elements of "Property, plant and equipment" under the scope of IAS 16, keeping agricultural products developed in them within the scope of IAS 41. These changes are effective for annual periods beginning on or after January 1, 2016 and may be applied in advance. This modification will not be applicable to the Group.
IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets": In May 2014, the IASB issued an amendment to IAS 16 and IAS 38. The amendment introduced changes to acceptable methods of depreciation and amortization. It clarifies that it is not appropriate to adopt a depreciation method that is based on revenue from ordinary business that include the use of an asset as it usually reflects factors other than the consumption of the economic benefits of the asset. It also establishes a rebuttable presumption that an amortization method that is based on the revenue generated by an activity that involves the use of an intangible asset is inappropriate. This amendment is effective for annual periods beginning on or after January 1, 2016. The Group has determined that this amendment will not have an impact on results of operations or the financial position.
2.3. Foreign currency translation
2.3.1. Functional and presentation currency
For each of the consolidated and combined entities in the Group, a functional currency is determined. The functional currency is the currency used in the primary financial environment in which the reporting entity operates. Transactions denominated in other currencies than the functional currency are considered transactions denominated in foreign currencies. None of the functional currencies of the combined entities has been considered the currency of a hyperinflationary economy.
F-13
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
These consolidated combined financial statements are presented in Argentine pesos, which is the Group's presentation currency.
IAS 29 "Financial reporting in hyperinflationary economies" requires that the financial statements of an entity whose functional currency is the currency of an a hyperinflationary economy with high inflation, whether they are based on the historical cost method or the current cost method, be stated in terms of the measuring unit current at the closing date of the reporting period. For such purpose, in general terms, the inflation produced from the acquisition date or the revaluation date, as applicable, must be computed in non-monetary items. In order to conclude whether the economy is a hyperinflationary economy, the standard details a series of factors to be considered, among which the existence of a cumulative inflation rate over three years that approaches or exceeds 100% is included. Taking into consideration the inconsistency of the inflation data published by the National Institute of Statistics and Census, the current downward trend of the level of inflation and the fact that the other indicators are insufficient to reach a definite conclusion, there is insufficient evidence to conclude that Argentina's economy is a hyperinflationary economy as of November 30, 2016. Therefore, the restatement criteria established in IAS 29 have not been applied in the reporting year.
Although the Argentine economy does not meet the necessary and objective conditions to qualify as a hyperinflationary economy, in accordance with IAS 29, and taking into account the legal and regulatory limitations imposed by professional bodies and control authorities for purposes of preparing adjusted financial statements as of November 30, 2016, it must be mentioned that certain macroeconomic variables that affect the Groups' business, such as salary costs and the prices of supplies, have suffered somewhat important annual variations, a circumstance that must be taken into account when evaluating and interpreting the Groups' financial position and results of operations in these financial statements.
2.3.2. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated combined statements of comprehensive income. Foreign exchange gains and losses are presented in the combined statement of comprehensive income within "Exchange differences, net".
2.3.3. Subsidiaries and associated companies
The results and financial position of all the combined entities that have a functional currency different from the presentation currency of the Group are translated into the presentation currency as follows:
F-14
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
of each transaction, in which case such income and expenses are translated at the exchange rate at the date of each transaction); and
The exchange differences resulting from this process are reported in "Other Comprehensive Income".
When an investment is sold or disposed of, in whole or in part, the exchange differences are recognized in the consolidated combined statements of comprehensive income as part of the gain or loss on the sale or disposal.
2.4. Scope of combination
The scope of combination for the Group's combined financial statements for the fiscal years ended November 30, 2016, 2015 and 2014 was determined on the principles of the legal reorganization approach. This approach is based on the fact that the economic activities that form the new entity were not managed as one division in the past, but the entities are legally bound together within a reorganization process. During the reporting periods of the combined financial statements, the assets and liabilities forming the reporting entity were under common control of the Navilli Family. In preparation of these combined financial statements, certain businesses have been prepared on a "carve-out" basis from their respective historical consolidated financial statements taking into account the target structure of the reorganization.
These consolidated combined financial statements include the results of Molino Cañuelas and all its subsidiaries from the date that control commences to the date that control ceases.
2.4.1. Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully combined from the date on which control is transferred to the Group and they are de-combined from the date that control ceases.
The Group accounts for acquisitions using the purchase method of accounting as prescribed by IFRS 3. Consideration is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to acquisitions are recorded as expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of consideration over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated combined statements of comprehensive income.
Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
F-15
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.4.2. Associated companies
Associates are those entities over which the Group has significant influence, such as the power to intervene in decisions of financial and operating policy of the investee, but not control. These entities are recorded using the equity method.
By using the equity method, investments are initially recognized at cost, and that amount is increased or decreased to recognize the investor's share in the profits and losses of the entity after the date of acquisition. If applicable, the value thereof includes the goodwill recognized for its acquisition. When the group's share of losses equals or exceeds the value of participation in such entities, the Group does not recognize further losses, unless there are legal or constructive obligations to provide funds or make payments on behalf of them.
The Group determines at each reporting date whether there is objective evidence that an investment in an associate is not recoverable. If so, the amount of impairment is calculated as the difference between the recoverable amount of the investment and its book value, recognizing the resulting amount in "Equity in earnings of non-consolidated entities" in the consolidated combined statements of comprehensive income.
2.4.3. Business combinations
The acquisition method of accounting is used to account for all business combinations (except for acquisitions under common control described in note 1), regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a business comprises:
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in profit or loss as a bargain purchase.
F-16
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the obligor's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognized in profit or loss.
2.4.4. Common control acquisitions
In these consolidated combined financial statements, the Group has applied the predecessor accounting approach in accordance with the rules on accounting for business combinations under common control in combined financial statements. This means that the assets and liabilities of the recently acquired and to be acquired businesses included in these consolidated combined financial statements correspond to the historical amounts in the individual financial statements of the combined entities (predecessor values). Businesses in accordance with IFRS 3 that were acquired or will be acquired or contributed to Molino Cañuelas are included in the consolidated combined financial statements for all periods presented adjusted so as to achieve uniformity of accounting policies. Accordingly, any consideration given or received in relation to those common control transactions is recognized directly in equity as withdrawals or contributions at the time of the transfer. Balances from intercompany transactions were eliminated.
2.5. Property, plant and equipment
Property, plant and equipment is recorded initially at cost. Historical cost comprises the purchase price and any costs directly attributable to the acquisition or construction.
Subsequent to initial recognition the following accounting models are followed:
Revaluations are prepared regularly by Management, taking into account independent valuations, based on the depreciated replacement cost approach, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. Increases in value are credited to Other Comprehensive Income and accumulated in equity under the heading "Revaluation surplus". Revaluations were recorded at the end of each of the years reported.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
F-17
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
Borrowing costs directly attributable to the construction or production of assets that require a substantial time to be ready for use or sale are added to the cost of those assets until such time as they are substantially ready to be used. Any investment income earned on temporary investment of such funds is deducted from the borrowing costs incurred. The Group has capitalized interest on the construction of plants and equipment.
The depreciation of these assets is calculated using the straight-line method, using annual rates sufficient to extinguish their values at the end of their estimated useful life. Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately.
These costs may include the cost of replacing parts that are eligible for capitalization when the costs of replacing the parts are incurred. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statements of comprehensive income during the period in which they are incurred.
Useful lives for each of the property, plant and equipment classes are:
Land |
Not depreciated | |
Buildings and facilities |
50 years | |
Machinery |
20 years | |
Furniture and IT equipment |
10 years | |
Vehicles |
5 years |
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the corresponding asset and are recognized within "Other operating income, net" in the statements of comprehensive income.
2.6. Investment property
Investment property are comprised of land and buildings held to earn rentals or for capital appreciation and not used in the production of goods or services or for administrative purposes. Investment property is measured at acquisition or construction cost, less accumulated depreciation and impairment losses, if any. Land is not depreciated. Depreciation on buildings is calculated using the straight-line method over their estimated useful lives of 50 years.
The investment property's residual values, useful lives and depreciation methods are reviewed, and adjusted, if appropriate, at each statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals of investment property are determined by comparing the proceeds with the carrying amount of the corresponding asset and are recognized within "Other operating
F-18
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
income, net" in the combined statements of comprehensive income. Repairs and maintenance expenses are recorded within "Other operating income, net" in the period in which they are incurred.
2.7. Intangible assets
Intangible assets are those non-monetary assets, without physical substance, and identifiable for being either separable or arising from contractual or other legal rights. They are recorded when they can be measured reliably and are likely to generate benefits to the Group.
2.7.1. Goodwill
Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognized by the Group on an acquisition of a business. Goodwill is computed as the excess of the consideration paid over the fair value of the net assets of the acquired business at the acquisition date and is allocated to those cash generating units (CGU) or group of cash generating units expected to benefit from the acquisition for the purpose of impairment testing. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortized but tested for impairment on an annual basis, or more frequently if there is an indication of impairment. The impairment review requires management to make certain judgments, including estimating the recoverable value of the CGU to which the goodwill relates, based on either fair value less costs-to-sell or the value-in-use, as appropriate, in order to reach a conclusion on whether it deems the goodwill is impaired. Any impairment is recognized immediately as an expense and is not reversed later on.
2.7.2. Software
Costs associated with maintaining software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognized as intangible assets when the following criteria are met:
These assets are amortized using the straight line method over a period of 3 to 5 years.
F-19
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.7.3. Other intangible assets
Trademarks, registrations and patents, and customer related intangibles acquired individually are initially valued at cost. Product development costs are recognized as an asset only to the extent that specific recognition criteria, as set out in IAS38 'Intangible assets', relevant to the proposed application are met and the amount recognized is recoverable through future economic benefits. All research costs are recognized in the consolidated income statement as incurred.
At the closing date of the financial statements, intangible assets with finite useful lives are stated at cost, net of accumulated amortization and accumulated impairment losses, if any. These assets are tested for impairment when events or circumstances indicate that their book value may not be recoverable. The customer related intangibles acquired by the Group have been classified as assets with finite useful lives and are amortized using the straight line method over a maximum period of 5 years.
The trademarks acquired by the Group have been classified as intangible assets with an indefinite useful life. The main factors considered for this classification include the years they have been in service and their recognition among customers in the industry.
Intangible assets with indefinite useful life are those arising from contracts or other legal rights that can be renewed without significant cost and for which, based on an analysis of all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate positive net cash inflows for the entity. These intangible assets are not amortized but are subject to annual impairment tests, either individually or at the CGU level. The categorization as "indefinite useful life" is also reviewed annually to confirm whether it remains sustainable.
2.8. Impairment of non-financial assets
At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment, investment property under and finite-life intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where an impairment loss is subsequently reversed the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in the statements of comprehensive income.
2.9. Leases
The Group is the lessee in certain operating and finance lease agreements. Leases are classified at inception as finance or operating leases.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor)
F-20
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
are charged to the statements of comprehensive income on a straight-line basis over the period of the lease.
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease's inception at the lower of the fair value of the leased property and the present value of the minimum lease payments.
2.10. Inventories
Inventories are measured at the lower of cost and net realizable value. Cost is determined using the weighted average method. The cost of finished goods and work in process includes raw material costs, direct labor, other direct costs and manufacturing overheads, on the basis of normal operating capacity, and excludes financing costs. The net realizable value is the estimated selling price in the normal course of business, less direct selling expenses.
Allowances for impairment, inventory obsolescence and slow moving inventory are determined for goods which at period end have a net realizable value below historical cost.
2.11. Financial assets
The Group classifies its financial assets in the following categories: those to be measured subsequently at amortized cost and those to be measured at fair value. This classification depends on the business model followed by the Group to manage its financial assets and the characteristics of the contractual cash flows of the financial assets.
2.11.1. Financial assets at amortized cost
Financial assets are measured at amortized cost when they meet the following criteria: the objective of the Group's business model is to hold the asset to collect the contractual cash flows; and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.
2.11.2. Financial assets at fair value through profit or loss
Financial assets measured at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it has been acquired mainly for the purpose of being sold in the short-term.
2.11.3. Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets at amortized cost are initially recognized at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statements of comprehensive income. Financial assets are derecognized when the rights to receive cash flows from
F-21
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
A gain or loss on a debt instrument that is subsequently measured at fair value and is not part of a hedging relationship is recognized in profit or loss and presented in the statements of comprehensive income within "financial results, net" in the period in which they arise.
A gain or loss on a debt instrument that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the financial asset is derecognized or impaired and through the amortization process using the effective interest method.
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset carried at amortized cost is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
2.12. Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Commodity future contract fair values are computed with reference to quoted market prices on future exchanges markets. The fair values of commodity options are calculated using year-end market rates together with common option pricing models.
Derivatives are only used for economic hedging purposes and not as speculative investments. The Group's policy is to buy or sell commodity future contracts to reduce volatility, but transactions that may be effective hedges in economic terms may not qualify for hedge accounting under IAS 39. Any derivatives that the Group holds to hedge these exposures are classified as "Fair value through profit or loss" and are shown in a separate line on the face of the combined statements of financial position.
2.13. Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less allowance for trade receivables if any. An allowance for trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, and based on legal counsel reports, post-closing collections, pledges received, and overall financial situation of the debtors.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the combined statements of comprehensive income within selling expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling expenses in the statements of comprehensive income.
F-22
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.14. Cash and cash equivalents
Cash and cash equivalents includes cash on hand, demand deposits held with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
2.15. Share Capital
Molino Cañuelas ordinary shares are classified in equity and remain registered at their nominal value. Combined entities share capital is classified as retained earnings in the consolidated combined financial statements.
2.16. Borrowings
Loans are initially recognized at fair value, net of transaction costs, and subsequently carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statements of comprehensive income during the loan period, using the effective interest method.
2.17. Trade and other payables
Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, whenever the impact of the discounting is significant.
Accounts payables related to purchases of grains from producers with prices to be fixed at settlement are measured by valuing each ton of grain owed at current fair value using prices quoted on active grain markets at the end of each year or period, adjusted by the contractual conditions specified by the Group.
2.18. Provisions
Provisions are recognized when the Group has a present legal or assumed obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate of the amount of the obligation can be made.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Changes in provisions as a result of the passing of time are recorded in the combined statements of comprehensive income under "Financial costs".
The Group bases its provisions on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters.
F-23
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.19. Current and deferred income tax
The charge for income tax for the year comprises current and deferred tax. Tax is recognized in the combined statements of comprehensive income, except to the extent that it relates to items recognized directly in equity, in which case, it is also recognized in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in each country where the combining subsidiaries currently operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the statement of financial position and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred taxes assets and liabilities are shown netted when there is a legal right to offset current tax assets with current tax liabilities and when the Group has the intention and ability to settle tax balances on a net basis.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
The Group is able to control the timing of dividends from its subsidiaries and does not expect to remit overseas earnings in the foreseeable future in a way that would result in a charge to taxable profit. Hence deferred tax is recognized in respect of the retained earnings of overseas subsidiaries only to the extent that, at the date of the combined statements of financial position, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary.
2.19.1. Tax on minimum presumed income
The Group determines the tax on minimum presumed income by applying the current 1% tax rate to taxable assets as of the end of each period. This tax complements income tax. The Group's tax liability will be the higher of the two taxes. However, if the tax on minimum presumed income in a fiscal year exceeds the income tax, such excess may be computed as prepayment of any income tax arising that may be generated in the following ten years.
F-24
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.20. Revenue recognition
2.20.1. Domestic market sales
The Group's revenue is mainly generated from the sales of goods to consumers and industrial businesses.
Net sales of products represent the invoiced value of goods, net of trade discounts and allowances, if any. The Group recognizes revenue on sales when the products are delivered and the customers take ownership and assume risk of loss, which is when the products are received by the customer at its or a designated location.
2.20.2. Export sales
Delivery terms for export sales are usually FOB (Free on Board) as defined by Incoterms 2010, which are the official rules for the interpretation of trade terms issued by the International Chamber of Commerce. In the event of any discrepancies between trade agreements and Incoterms defined for the operation the terms established in the contracts prevail.
The Group recognizes revenue on sales when the customers take ownership of the goods and assume risk of loss.
2.20.3. Revenue from services
Revenue is recognized at the fair value of the consideration received or receivable in the period when such services have been rendered, and represents the amounts receivable for sales of services, net of discounts. The Group recognizes revenue from services when the amounts can be measured by reliable means and when it is likely that future economic benefits are generated for the entity.
2.20.4. Commercial agreements with distributors, wholesalers and supermarkets
The Group holds commercial agreements with its customers, distributors, wholesalers and supermarkets that establish discounts, bonuses, and granting of consideration for advertising and promotion activities.
Payments for services and grants of consideration are recognized when agreed upon promotional activities have taken place and they are recorded as Promotion, advertising, and research expenses in Selling expenses in the statements of comprehensive income. Concepts that do not involve consideration are recognized as a reduction of the sales price.
2.20.5. Interest
Interest income is recognized in proportion to time elapsed, using the effective interest rate method.
2.20.6. Rental of investment property
Revenue from rental of investment property is recognized in the statements of comprehensive income based on the straight-line method during the lease term.
F-25
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
2. Summary of significant accounting policies (Continued)
2.21. Vegetable oil private compensation
Private compensation grants related to "Argentina vegetable oil domestic market compensation trust" are deducted from Cost of Sales. There are no unfulfilled conditions or other contingencies attaching to these grants.
"Argentina vegetable oil domestic market compensation trust" is a private agreement between exporters and domestic market providers of sunflower and soybean oil, flour and related by-products, supervised by the Argentinean government, with the objective of dissociating the effects of fluctuations in international prices of exports from domestic market prices.
2.22. Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to equity holders of the parent by the weighted average number of common shares outstanding during the year. For all periods presented, there were no differences in the weighted-average number of common shares used for basic net earnings per share and there are no financial instruments that could have a dilutive effect. As a result the basic and diluted earnings per share are equal.
2.23. Dividend distribution
Cash dividend distribution to the Group's shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved.
2.24. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
3. Financial Risk Management
The Group is exposed to various types of risks including market risk (currency risk, commodity price risk and interest rate risk), liquidity risk and credit risk. The Group's overall risk management program focuses on minimizing potential adverse effects on the Group's results resulting from these financial risks. The Group has established a Risk Oversight Committee reporting to the Board of Directors responsible for monitoring these risks on an ongoing basis. The Group's financial assets include cash and cash equivalents, trade receivables, derivatives and other receivables. Financial liabilities include trade payables, loans with financial institutions, derivatives and other payables.
3.1. Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks: foreign currency risk, commodity price risk and interest rate risk.
F-26
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
3. Financial Risk Management (Continued)
3.1.1. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The Group's exposure to foreign currency risk is mainly related to its exports and local business impacted by foreign currency because it buys and sells commodities (mainly grains denominated in US dollars). Therefore, the Group's financial assets and liabilities in foreign currency (trade receivables, inventories and debt with financial institutions) mainly relate to those activities. In order to minimize foreign currency risk, the Group seeks to maintain a balanced position between its current assets (including inventories) and current liabilities.
The following tables show the net monetary position of the non-Argentine pesos balances of the Group. Amounts are presented in Argentine pesos for purpose of these tables.
2016 Net monetary position Asset / (Liability) |
US$ | EUR$ | BR$ | Other currencies |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
2,295,635 | 100 | 38,492 | 7,031 | 2,341,258 | |||||||||||
Trade and other receivables, net |
272,055 | | 160,255 | 50,638 | 482,948 | |||||||||||
Trade and other payables |
(1,215,316 | ) | (68,249 | ) | (63,143 | ) | (87,885 | ) | (1,434,593 | ) | ||||||
Borrowings |
(10,007,354 | ) | | | | (10,007,354 | ) | |||||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(8,654,980 | ) | (68,149 | ) | 135,604 | (30,216 | ) | (8,617,741 | ) | |||||||
Inventories |
2,482,355 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
(6,135,386 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
2015 Net monetary position Asset / (Liability) |
US$ | EUR$ | BR$ | Other currencies |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
356,497 | | 27,516 | 5,441 | 389,454 | |||||||||||
Trade and other receivables, net |
320,298 | | 70,327 | 50,521 | 441,146 | |||||||||||
Trade and other payables |
(532,902 | ) | (38,684 | ) | (17,522 | ) | (32,823 | ) | (621,931 | ) | ||||||
Borrowings |
(1,495,937 | ) | | (5,519 | ) | (16,998 | ) | (1,518,454 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(1,352,044 | ) | (38,684 | ) | 74,802 | 6,141 | (1,309,785 | ) | ||||||||
Inventories |
1,536,537 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
226,752 | |||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
2014 Net monetary position Asset / (Liability) |
US$ | EUR$ | BR$ | Other currencies |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
28,866 | | 17,131 | 1,425 | 47,422 | |||||||||||
Trade and other receivables, net |
147,932 | | 78,257 | 96,346 | 322,535 | |||||||||||
Trade and other payables |
(549,239 | ) | (12,708 | ) | (19,925 | ) | (47,003 | ) | (628,875 | ) | ||||||
Borrowings |
(1,475,821 | ) | | | (17,069 | ) | (1,492,890 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(1,848,262 | ) | (12,708 | ) | 75,463 | 33,699 | (1,751,808 | ) | ||||||||
Inventories |
1,290,999 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
(460,809 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
F-27
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
3. Financial Risk Management (Continued)
2013 Net monetary position Asset / (Liability) |
US$ | EUR$ | BR$ | Other currencies |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash and cash equivalents |
105,209 | | 50,615 | 2,644 | 158,468 | |||||||||||
Trade and other receivables, net |
150,597 | | 47,046 | 44,931 | 242,574 | |||||||||||
Trade and other payables |
(377,776 | ) | (15,467 | ) | (18,371 | ) | (14,346 | ) | (425,960 | ) | ||||||
Borrowings |
(1,079,107 | ) | | (12,008 | ) | (2,550 | ) | (1,093,665 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net monetary position |
(1,201,077 | ) | (15,467 | ) | 67,282 | 30,679 | (1,118,583 | ) | ||||||||
Inventories |
831,737 | |||||||||||||||
| | | | | | | | | | | | | | | | |
Total position |
(286,846 | ) | ||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Other currencies include: Bolivianos, Chilean pesos, Chinese yuan, and Uruguay pesos
At November 30, 2016, 2015, 2014 and 2013 a 1% devaluation (revaluation) effect of the Argentine peso, considering all other variables constant, would result in a loss (profit) of $80,433, $10,397, $15,761 and $10,512, respectively, and a profit (loss) in other comprehensive income of $5,745, $2,701, $1,757 and $674, respectively.
3.1.2. Commodity Price risk:
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices. As a result of the Group's activities, its performance is mainly exposed to the volatility of the international prices of soybean, corn, wheat and sunflower. In order to mitigate this risk, the Group i) monitors on a regular basis the commercial position of grains and takes actions to maintain a natural balanced position, and ii) trades (purchase and sale of grains) in forward markets.
At November 30, 2016, 2015, 2014 and 2013 a 1% increase (decrease) of the international prices related to soybean and sunflower considering all other variables constant would result in an increase (decrease) of the net profit/(loss) and equity of $17,525, $8,872 $6,895 and $1,126, respectively.
3.1.3. Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group manages interest rate risk by i) a balanced mix between fixed and variable loans, ii) balanced mix between foreign and local currency debt and operations with pre-financed exports.
F-28
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
3. Financial Risk Management (Continued)
The analysis at year end is as follows:
Fixed rate borrowings:
|
2016 | 2015 | 2014 | 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentine peso |
223,117 | 3,119,738 | 1,540,660 | 1,321,025 | |||||||||
United States dollar |
3,942,616 | 615,343 | 628,150 | 702,827 | |||||||||
Brazilian reales |
| 5,519 | | 12,008 | |||||||||
Chilean peso |
| 16,998 | 17,069 | 2,550 | |||||||||
| | | | | | | | | | | | | |
|
4,165,733 | 3,757,598 | 2,185,879 | 2,038,410 | |||||||||
| | | | | | | | | | | | | |
Variable rate borrowings:
|
2016 | 2015 | 2014 | 2013 | |||||||||
Argentine peso |
148,578 | 476,644 | 318,713 | 441,825 | |||||||||
United States dollar |
6,064,738 | 880,594 | 847,671 | 376,280 | |||||||||
| | | | | | | | | | | | | |
|
6,213,315 | 1,357,238 | 1,166,384 | 818,105 | |||||||||
| | | | | | | | | | | | | |
Total borrowings |
10,379,048 | 5,114,836 | 3,352,263 | 2,856,515 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
During the years ended November 30, 2016, 2015, 2014 and 2013 an increase (decrease) in 100 basis points in the Libor rate related to the portion of financial liabilities with variable interest rate and considering all other variables constant would result in an decrease (increase) of the net profit of $60,647, $8,806, $8,477 and $3,763, respectively.
3.2. Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its liabilities. Liquidity risk is monitored periodically by the Risk Oversight Committee by maintaining sufficient cash and credit lines in order to meet the Group's commercial and financial obligations with suppliers and financial institutions. The Group maintains sufficient readily realizable assets to satisfy its current financial liabilities.
The Group has assessed its liquidity risk as low since the access to funding sources is reasonably assured and its short-term debt could be repaid or refinanced without any major concerns.
The tables below analyzes the Group's non-derivative and derivative financial liabilities as of November 30, 2016, 2015, 2014 and 2013 into relevant maturity groupings based on the remaining period to the contractual maturity date, at the date of the statement of financial position. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables when discounting is not applied.
2016
|
1 year | 1 - 2 years | 2 - 5 years | >5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trade and other payables |
6,162,841 | 189,041 | | | |||||||||
Derivatives |
1,154 | | | | |||||||||
Borrowings |
4,801,518 | 1,411,439 | 4,480,661 | 1,299,627 | |||||||||
| | | | | | | | | | | | | |
|
10,965,513 | 1,600,480 | 4,480,661 | 1,299,627 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-29
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
3. Financial Risk Management (Continued)
2015
|
1 year | 1 - 2 years | 2 - 5 years | >5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trade and other payables |
3,964,554 | 13,850 | | | |||||||||
Derivatives |
1,365 | | | | |||||||||
Borrowings |
4,162,042 | 791,168 | 682,717 | 55,517 | |||||||||
| | | | | | | | | | | | | |
|
8,127,961 | 805,018 | 682,717 | 55,517 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2014
|
1 year | 1 - 2 years | 2 - 5 years | >5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trade and other payables |
3,285,529 | 72,760 | | | |||||||||
Derivatives |
27,479 | | | | |||||||||
Borrowings |
2,264,895 | 880,393 | 423,140 | 116,634 | |||||||||
| | | | | | | | | | | | | |
|
5,577,903 | 953,153 | 423,140 | 116,634 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2013
|
1 year | 1 - 2 years | 2 - 5 years | >5 years | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Trade and other payables |
1,887,736 | 13,498 | | | |||||||||
Derivatives |
1,310 | | | | |||||||||
Borrowings |
2,423,854 | 443,800 | 174,685 | 61,743 | |||||||||
| | | | | | | | | | | | | |
|
4,312,900 | 457,298 | 174,685 | 61,743 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
3.3. Credit risk
Credit and counterparty risk is the risk of incurring losses as a result of a third party's failure to comply with its obligations. Financial instruments which potentially expose the Group to credit and counterparty risk consist principally of cash and cash equivalents, accounts receivable, advanced payments made to suppliers, derivatives and other receivables. The Group seeks to mitigate its exposure to credit risk by i) placing its cash and cash equivalents with reputable international financial institutions, and monitoring the credit rating scores of such institutions, ii) client diversification and iii) robust credit limit policy and iv) Group's insurance policy with an international credit insurance institution (Compagnie Française d'Assurance pour le Commerce ExterieurCOFACE) for defaulted clients covering 90% of clients' amounts owed to the Group.
The allowance for doubtful accounts is determined by the analysis of the client's capacity to repay the amounts owed to the Group. As of November 30, 2016, 2015, 2014 and 2013, the allowance for doubtful accounts represents approximately 1%, 1%, 2% and 1% of total trade receivable (Note 12), respectively.
Refer to note 12 for trade receivables aging analysis. Management does not anticipate any material losses as a result of credit risk.
3.4. Capital Management
As a fundamental pillar of its strategy, the Group has established a commitment to maintain a conservative financial policy, seeking to maximize the returns to its shareholders and maintaining a solid credit rating and healthy capital ratios to sustain its business.
F-30
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
3. Financial Risk Management (Continued)
Such policy includes amongst others: i) monitoring of changes in macroeconomic variables, ii) funding strategy, iii) funding costs, and iv) potential impact of changes in the funding and liquidity of commercial and operating activities. The Group seeks to maintain a healthy mix of debt and equity that satisfies acceptable level ratios and receiving good credit ratings from international agencies.
The Group measures the net debt to Total Adjusted Segment EBITDA as one of the main capital management drivers. This ratio allows measuring the financial health of the Group:
BorrowingsCash
and cash equivalents
Total Adjusted Segment EBITDA
This ratio considers the borrowings net of cash and cash equivalents over Total Adjusted Segment EBITDA. As of November 30, 2016, 2015, and 2014 the ratios were as follows:
|
2016 | 2015 | 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Borrowings |
10,379,048 | 5,114,836 | 3,352,263 | |||||||
Cash and cash equivalents |
3,794,667 | 943,731 | 1,121,351 | |||||||
| | | | | | | | | | |
Net debt |
6,584,381 | 4,171,105 | 2,230,912 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total Adjusted Segment EBITDA (Note 5) |
2,276,759 | 1,092,616 | 888,895 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Net debt/Total Adjusted Segment EBITDA |
2.89 | 3.82 | 2.51 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Management rigorously monitors this ratio on a continuous basis. Future estimates of such ratio are made by the Group as a key factor in its capital allocation strategy.
4. Critical accounting policies, estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies.
The Group has identified the following areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated combined financial statements.
The Group has acquired businesses which were part of larger entities. As such, in preparation of its audited consolidated combined financial statements, the Group performed certain carve-out adjustments to reflect the historical financial performance of such acquired businesses in its consolidated combined financial statements. The carve-out adjustments required it to perform certain allocations and estimates which were based on the judgments and assumptions of its management. These carve-out adjustments involved subjective judgments as to the determination of reasonable methods of allocation.
F-31
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
Should any of its estimates and assumptions change or prove to have been incorrect, it could have a material impact on its business, consolidated combined financial position, results of operations, or cash flows.
In particular, the Group estimated and assumed the attribution of assets and liabilities, revenues and costs, financial liabilities and related interest costs, and taxes.
The Group applied these methods, assumptions, judgments and estimates on a consistent basis for all of the periods presented in the consolidated combined financial statements. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.
The Group carries certain classes of property, plant and equipment under the revaluation model under IAS 16. The revaluation model requires us that the Group carries property, plant and equipment at revalued amounts, being fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. IAS 16 requires us to carry out these revaluations with sufficient regularity so that the carrying amounts of its property, plant and equipment does not differ materially from that which would be determined using fair value at the end of a reporting period. The determination of fair value at the date of revaluation requires judgments, estimates and assumptions based on market conditions prevailing at the time of any such revaluation. Changes to any of its judgments, estimates, assumptions or market conditions subsequent to a revaluation will result in changes to the fair value of property, plant and equipment.
The Group prepares the corresponding revaluations on a regular basis taking into account the work of independent appraisers. The Group uses different valuation techniques depending on the class of property being valued. Generally, the Group determines the fair value of its industrial buildings,
F-32
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
warehouses, mills and facilities and grain storage facilities based on a depreciated replacement cost approach. The Group determines the fair value of its land based on current market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, the Group may use alternative valuation methods, such as recent prices on less current markets or discounted cash flow projections.
Property valuations is a significant area of estimation uncertainty. Valuation of property, plant and equipment is a central component of the business. Fair values are prepared regularly by Management, taking into account independent valuations. The determination of fair value for the different classes of property, plant and equipment is sensitive to the selection of different significant assumptions and estimates. Changes in those significant assumptions and estimates could materially affect the determination of the revalued amounts of property, plant and equipment. The Group utilizes historical experience, market information and other internal information to determine and/or review the appropriate revalued amounts.
The following are the most significant assumptions used in the preparation of the revalued amounts for its classes of property, plant and equipment:
F-33
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
The Group has not made any material changes to its valuation methodology, assumptions and estimates during the past three years.
Intangible assets with finite lives and property, plant and equipment are amortized or depreciated over their estimated useful life on a straight line basis. The Group monitors conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. The Group tests these assets for potential impairment whenever its management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group has applied judgment in the identification of the indicators of impairment for property and equipment and intangible assets. The Group has determined that there were no indications of impairment for any of the periods presented in its consolidated combined financial statements. Accordingly, the Group has not estimated any recoverable values for its property, plant and equipment and finite life intangible assets.
As part of the Cargill acquisition, the Group acquired a brand which the Group determined to have an indefinite useful life. The balance of this brand, which amounted to AR$ 65 million as of November 30, 2016, is not amortized to expense, instead it is tested for impairment at least annually. The Group perform its annual impairment analysis at the end of the fourth quarter. If events or indicators of impairment occur between annual impairment analyses, the Group perform an impairment analysis of the brand at that date. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant asset. In testing for a potential impairment of this brand, the Group (1) allocated the brand to its "Branded industrial products" cash generating unit to which the acquired brand relates; (2) estimate the recoverable value of this cash generating unit using a discounted cash flow model; (3) compare the recoverable value of the cash generating unit to its carrying value; and (4) if the estimated recoverable value of the cash generating unit is less than the carrying value, the Group must reduce the carrying amount of its cash generating unit to its estimated recoverable amount, and (5) allocate the reduction or impairment loss to the assets in the cash generating unit.
The process of evaluating the potential impairment of its brand is subjective and requires significant judgment at many points during the analysis, including the identification of its cash generating unit, identification and allocation of the assets and liabilities to the cash generating unit and determination of its recoverable value. In estimating the recoverable value of the cash generating unit for the purposes of its annual or periodic impairment analyses, the Group makes estimates and significant judgments about the future cash flows of that cash generating unit. Its cash flow forecasts is based on assumptions that represent the highest and best use for its cash generating unit.
The Group employs a discounted cash flow model to estimate the value in use of the cash generating unit. This model requires the use of significant estimates and assumptions regarding future revenues, costs, margins, terminal year growth rate and cost of capital. Its cash flow models are based on its forecasted results for a period of 5 years. Actual results could differ from its projections. Some assumptions, such as future revenues and costs are company driven and could be affected by a loss of one or more significant contracts or customers; failure to control costs on certain contracts or a decline in demand based on changing economic or regulatory conditions. Changes in external market
F-34
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
conditions may affect certain other assumptions, such as the cost of its capital. Market conditions can be volatile and are outside of its control.
The net cash inflows are discounted at a rate equivalent to the weighted average cost of capital adjusted by an appropriate risk factor. The terminal year growth rate applied for impairment testing in 2016 and the capital cost factors used to discount the expected cash flows are shown in the following table:
Variable
|
% | |||
---|---|---|---|---|
Terminal year growth rate |
2 | |||
Weighted average cost of capital |
10.5 |
The Group completed its annual review of indefinite life intangible assets for the year ended November 30, 2016, which indicated that the Group had no impairment of the brand.
Although the Group believes that the assumptions and estimates utilized are appropriate based on information available to management, changes in assumptions or circumstances could require changes in the analysis. Adverse changes in the assumptions utilized within its indefinite lived intangible asset impairment test could cause a reduction or elimination of excess fair value over carrying value, resulting in potential recognition of impairment.
The sensitivity analysis for the cash-generating unit to which the brand was allocated was based on a 5% increase in the weighted average cost of capital or a 10% reduction in the long-term growth rate. The Group concluded that no impairment loss would need to be recognized on the brand in the cash-generating unit under these conditions.
Significant estimates are made to determine both current and deferred tax liabilities/assets, not least the value of deferred tax assets. Current tax is provided at the amounts expected to be paid, and deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized, based on management's assumptions relating to the amounts and timing of future taxable profits. The Group must then determine the possibility that deferred tax assets will be utilized and offset against future taxable profits. The actual results may differ from these estimates, for instance due to changes in the business climate, changed tax legislation, or the outcome of the final review by tax authorities and tax courts of tax returns.
As of the end of November 30, 2016, the Group recognized deferred tax assets of 359 million. A change in the estimate of the possibility for utilization thus can affect results both positively and negatively.
The amount of income tax the Group pays is subject to evaluation of assessment proceedings by income tax authorities, which may result in adjustments to its carried forward tax losses. Its estimate of the potential outcome for any uncertain tax issue is highly judgmental. The Group believes it has
F-35
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
adequately provided for any reasonably foreseeable outcome related to these matters. However, its future results may include favorable or unfavorable adjustments to its estimated tax liabilities in the period the assessments are made or resolved, tax examinations are closed or when statutes of limitation on potential assessments expire. As a result, its effective tax rate may fluctuate significantly.
For the fiscal year ended November 30, 2016 its effective tax rate was 3% attributable primarily due to the fact that the 1,380% increase in profit before income tax for the fiscal year ended November 30, 2016 was primarily attributable to one-time non-taxable income resulting from profit from a business combination and a deduction of the exchange rate difference generated from non-current borrowing.
Factors affecting the tax charge in future years are principally a devaluation in subsidiaries with dollar as a functional currency, an increase in non-taxable income and related expenses or any gain on acquisition of businesses.
The Group accounts for business combinations under the provisions of International Financial Reporting Standard 3 ("IFRS 3"), Business Combinations, which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values, with some exceptions. Non-controlling interests can be measured at either fair value or the present ownership interests' proportionate share of the acquiree's net identifiable assets. IFRS 3 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Otherwise, a gain on bargain purchase occurs where the consideration, the non-controlling interest and the previously held interest are less than the fair value of the net identifiable assets. A bargain purchase represents an economic gain, which should be immediately recognized in profit or loss. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.
In August 31, 2016, the Group completed the acquisition of the Cargill's mill operations. The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using all available information to make these fair value determinations, including independent appraisals. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted back to a present value. The discounted cash flow valuation method requires the use of assumptions, the most significant of which include: future revenue growth, future earnings before interest, depreciation and amortization, terminal value growth rate, weighted average cost of capital and discount rate.
The estimated fair value of identifiable intangible assets, consisting of customer relationships and brands acquired were determined using the income approach method and relief of royalty method, respectively. The acquisition resulted in the recognition of a bargain purchase gain of AR$ 1,084 million.
F-36
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
4. Critical accounting policies, estimates and judgments (Continued)
The income approach method used to value customer relationships requires the use of assumptions, the most significant of which include: the remaining useful life, expected revenue, survivor curve, earnings before interest and tax margins, marginal tax rate, contributory asset charges, weighted average cost of capital and discount rate.
The most significant assumptions under the relief of royalty method used to value brands include: estimated remaining useful life, expected revenue, royalty rate, tax rate, weighted average cost of capital and discount rate.
Management has developed these assumptions on the basis of historical knowledge of the business and projected financial information of the Company. These assumptions may vary based on future events, perceptions of different market participants and other factors outside the control of management, and such variations may be significant to estimated values.
The sensitivity analysis for the discounted cash flows was based on a 10% reduction in future cash flows, a 5% increase in the discount rate or a 10% reduction in the long-term growth rate. Those increases/decreases in isolation would have decreased the amount of the bargain purchase gain in AR$ (80) million, AR$ (140) million and AR$ (40) million, respectively.
5. Segment information
IFRS 8 "Operating Segments" requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and for assessment of performance. The amount reported for each segment item is the measure reported to the chief operating decision maker for these purposes. The Group's Executive Committee is responsible for measuring and steering the business success of the segments and is considered the chief operating decision maker within the meaning of IFRS 8.
The Group has three reportable operating segments, which are organized based upon similar economic characteristics and are similar in nature of products offered and production processes, the type and class of customer and distribution methods, as follows:
F-37
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
5. Segment information (Continued)
conditioning, transport and sale of agricultural commodities and commodity products. This segment sources primary agricultural food products to the Branded Industrial Products segment, and also provides farmers with a variety of products and services in exchange for primary food products. It also includes port operations at Las Palmas port and other logistics activities.
Definition of Adjusted Segment EBITDA
Adjusted Segment EBITDA refers to a segment's share of "Results from Operations before Financing and Taxation" and before depreciation and amortization. Adjusted Segment EBITDA excludes certain items that are not considered part of the Group's core operating results. Finance income, finance cost and Exchange differences are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the group.
The Group believes its presentation of Adjusted Segment EBITDA is useful to management in understanding its segments' operating and financial performance, to identify trends affecting the business, and in making strategic business decisions.
Total Adjusted Segment EBITDA refers to the sum of Adjusted Segment EBITDA for all segments.
A reconciliation is provided of Total Adjusted Segment EBITDA to Profit for the Year, the most directly comparable financial performance calculated and presented as required by IFRS.
F-38
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
5. Segment information (Continued)
The following tables present information with respect to the Group's reportable segments for the years ended November 30, 2016, 2015 and 2014:
November 30, 2016
|
Agro- services and sustainable sourcing |
Branded industrial products |
Retail products |
Elimination of Intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales to third parties |
17,318,513 | 11,281,549 | 3,717,638 | | 32,317,700 | |||||||||||
Intersegment sales |
5,965,898 | 1,456,850 | | (7,422,748 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
23,284,411 | 12,738,399 | 3,717,638 | (7,422,748 | ) | 32,317,700 | ||||||||||
Cost of sales |
(21,457,948 | ) | (8,728,087 | ) | (2,318,800 | ) | 7,422,748 | (25,082,087 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,826,463 | 4,010,312 | 1,398,838 | | 7,235,613 | |||||||||||
Selling expenses |
(1,117,284 | ) | (2,763,449 | ) | (537,739 | ) | (4,418,472 | ) | ||||||||
Administrative expenses |
(179,328 | ) | (305,340 | ) | (342,619 | ) | (827,287 | ) | ||||||||
Other operating income, net |
282 | 10,600 | | 10,882 | ||||||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
530,133 | 952,123 | 518,480 | | 2,000,736 | |||||||||||
Depreciation & Amortization |
40,417 | 185,293 | 50,313 | 276,023 | ||||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
570,550 | 1,137,416 | 568,793 | |||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Adjusted Segment EBITDA |
2,276,759 | |||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
1,079,546 | 967,602 | 443,537 | 2,490,685 | ||||||||||||
Property, plant and equipment |
1,651,868 | 5,652,299 | 4,410,454 | 11,714,621 | ||||||||||||
Intangible assets |
4,882 | 109,589 | | 114,471 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total |
2,736,296 | 6,729,490 | 4,853,991 | 14,319,777 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
F-39
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
5. Segment information (Continued)
November 30, 2015
|
Agro- services and sustainable sourcing |
Branded industrial products |
Retail products |
Elimination of Intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales to third parties |
9,639,881 | 10,033,966 | 2,460,545 | | 22,134,392 | |||||||||||
Intersegment sales |
4,750,189 | 816,265 | | (5,566,454 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
14,390,070 | 10,850,231 | 2,460,545 | (5,566,454 | ) | 22,134,392 | ||||||||||
Cost of sales |
(12,984,014 | ) | (8,003,631 | ) | (1,767,771 | ) | 5,566,454 | (17,188,962 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,406,056 | 2,846,600 | 692,774 | 4,945,430 | ||||||||||||
Selling expenses |
(812,502 | ) | (2,327,954 | ) | (406,531 | ) | (3,546,987 | ) | ||||||||
Administrative expenses |
(89,912 | ) | (272,404 | ) | (148,289 | ) | (510,605 | ) | ||||||||
Other operating income, net |
4,254 | 20,861 | 2,522 | 27,637 | ||||||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
507,896 | 267,103 | 140,476 | 915,475 | ||||||||||||
Depreciation & Amortization |
26,747 | 70,620 | 79,774 | 177,141 | ||||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
534,643 | 337,723 | 220,250 | |||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Adjusted Segment EBITDA |
1,092,616 | |||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
579,725 | 565,851 | 393,209 | 1,538,785 | ||||||||||||
Property, plant and equipment |
924,709 | 2,116,647 | 2,307,319 | 5,348,675 | ||||||||||||
Intangible assets |
5,473 | 3,764 | 5,122 | 14,359 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total |
1,509,907 | 2,686,262 | 2,705,650 | 6,901,819 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
F-40
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
5. Segment information (Continued)
November 30, 2014
|
Agro- services and sustainable sourcing |
Branded industrial products |
Retail products |
Elimination of Intersegment sales |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales to third parties |
10,699,570 | 6,729,027 | 2,392,602 | | 19,821,199 | |||||||||||
Intersegment sales |
4,291,820 | 923,128 | | (5,214,948 | ) | | ||||||||||
| | | | | | | | | | | | | | | | |
Net Sales |
14,991,390 | 7,652,155 | 2,392,602 | (5,214,948 | ) | 19,821,199 | ||||||||||
Cost of sales |
(13,556,686 | ) | (5,666,905 | ) | (1,659,209 | ) | 5,214,948 | (15,667,852 | ) | |||||||
| | | | | | | | | | | | | | | | |
Margin Before Operating Expenses |
1,434,704 | 1,985,250 | 733,393 | | 4,153,347 | |||||||||||
Selling expenses |
(1,170,560 | ) | (1,464,123 | ) | (332,739 | ) | (2,967,422 | ) | ||||||||
Administrative expenses |
(69,412 | ) | (240,839 | ) | (133,481 | ) | (443,732 | ) | ||||||||
Other operating income, net |
(788 | ) | 24,886 | (10 | ) | 24,088 | ||||||||||
| | | | | | | | | | | | | | | | |
Results from Operations Before Financing and Taxation |
193,944 | 305,174 | 267,163 | | 766,281 | |||||||||||
Depreciation & Amortization |
28,283 | 48,990 | 45,341 | 122,614 | ||||||||||||
| | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA |
222,227 | 354,164 | 312,504 | |||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Adjusted Segment EBITDA |
888,895 | |||||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Assets assigned to the segments |
||||||||||||||||
Inventories |
460,452 | 575,128 | 256,442 | 1,292,022 | ||||||||||||
Property, plant and equipment |
854,307 | 1,672,166 | 1,633,881 | 4,160,354 | ||||||||||||
Intangible assets |
4,448 | 4,910 | 6,462 | 15,820 | ||||||||||||
| | | | | | | | | | | | | | | | |
Total |
1,319,207 | 2,252,204 | 1,896,785 | 5,468,196 | ||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Adjusted Segment EBITDA reconciles to Profit for the Year, for the years ended November 30, 2016, 2015 and 2014 as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Profit for the Year |
864,382 | 11,931 | 147,809 | |||||||
Income tax expense |
25,263 | 48,173 | 68,396 | |||||||
Profit Before Income Tax |
889,645 | 60,104 | 216,205 | |||||||
Gain on acquisition of businesses |
(1,084,327 | ) | | | ||||||
Depreciation & Amortization |
276,023 | 177,141 | 122,614 | |||||||
Financial income |
(323,429 | ) | (230,221 | ) | (267,655 | ) | ||||
| | | | | | | | | | |
Financial costs |
1,070,446 | 687,128 | 506,041 | |||||||
Exchange differences, net |
1,448,401 | 398,464 | 311,690 | |||||||
| | | | | | | | | | |
Total Adjusted Segment EBITDA (unaudited) |
2,276,759 | 1,092,616 | 888,895 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-41
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
5. Segment information (Continued)
Revenue by destination country for the years ended November 30, 2016, 2015 and 2014 is the following:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Argentina |
20,342,731 | 13,040,742 | 11,797,195 | |||||||
Bolivia |
380,539 | 188,104 | 273,352 | |||||||
Brazil |
1,055,966 | 809,093 | 713,433 | |||||||
Chile |
155,402 | 422,897 | 208,130 | |||||||
Uruguay |
506,283 | 446,201 | 563,586 | |||||||
Rest of America |
320,679 | 210,305 | 545,030 | |||||||
Australia |
20,227 | 24 | 14 | |||||||
Africa |
2,092,890 | 1,386,042 | 888,030 | |||||||
China |
1,681,601 | 714,168 | 1,062,648 | |||||||
Rest of Asia |
4,035,811 | 3,585,546 | 1,755,937 | |||||||
Middle East |
414,302 | 523,974 | 1,005,308 | |||||||
Europe |
1,311,269 | 807,296 | 1,008,536 | |||||||
| | | | | | | | | | |
Total |
32,317,700 | 22,134,392 | 19,821,199 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total Property, plant and equipment, Investment property, and Intangible assets, included in non-current Assets, located in Argentina, the Group's country of domicile, and in all foreign countries in which the entity holds assets for the years ended November 30, 2016, 2015 and 2014 is the following:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Argentina |
11,030,254 | 4,996,443 | 3,933,556 | |||||||
Bolivia |
381 | 261 | 281 | |||||||
Brazil |
18,889 | 9,592 | 12,486 | |||||||
Chile |
270 | 316 | 467 | |||||||
Uruguay |
833,792 | 429,048 | 299,721 | |||||||
| | | | | | | | | | |
Total |
11,883,586 | 5,435,660 | 4,246,511 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Reconciliation of the above non-current assets by geography to Total Non-current Assets for the years ended November 30, 2016, 2015 and 2014 is the following:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-current assets by geography |
11,883,586 | 5,435,660 | 4,246,511 | |||||||
Investments in associates |
| | 653 | |||||||
Deferred income tax assets |
34,350 | 18,478 | 21,232 | |||||||
Other investments |
15 | 133 | 235 | |||||||
Other receivables, net |
359,790 | 78,569 | 61,313 | |||||||
Trade receivables, net |
| 4,439 | | |||||||
| | | | | | | | | | |
Total Non-current Assets |
12,277,741 | 5,537,279 | 4,329,944 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-42
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
6. Property, plant and equipment, net
Changes in property, plant and equipment for the years ended November 30, 2016, 2015 and 2014 were as follows:
|
Furniture and Equipment |
Machinery | Vehicles | Land, Buildings and Facilities |
Spare parts |
Construction in Progress |
Total | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2016 |
||||||||||||||||||||||
Cost |
99,386 | 3,947,053 | 85,070 | 6,543,126 | 1,154 | 1,139,869 | 11,815,658 | |||||||||||||||
Accumulated depreciation |
(63,665 | ) | | (37,372 | ) | | | | (101,037 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net book amount |
35,721 | 3,947,053 | 47,698 | 6,543,126 | 1,154 | 1,139,869 | 11,714,621 | |||||||||||||||
Year ended November 30, 2016 |
||||||||||||||||||||||
Opening net book amount |
26,113 | 1,823,303 | 23,113 | 3,238,359 | 1,154 | 236,633 | 5,348,675 | |||||||||||||||
Additions |
9,232 | 78,002 | 28,165 | 112,984 | | 1,056,459 | 1,284,842 | |||||||||||||||
Acquisition of businesses (Note 30) |
| 916,632 | 4,532 | 1,214,849 | | | 2,136,013 | |||||||||||||||
Reclassifications, net |
11,840 | 83,612 | | 68,630 | | (164,082 | ) | | ||||||||||||||
Reclassifications from Investment Property |
| | | 24,698 | | | 24,698 | |||||||||||||||
Disposals, net |
(46 | ) | (15,924 | ) | (1,724 | ) | (5,189 | ) | | | (22,883 | ) | ||||||||||
Revaluationbook value |
| 930,269 | | 1,758,031 | | | 2,688,300 | |||||||||||||||
Revaluationaccumulated depreciation |
| 120,741 | | 120,942 | | | 241,683 | |||||||||||||||
Currency conversion |
3,009 | 131,159 | 2,998 | 130,764 | | 10,859 | 278,789 | |||||||||||||||
Depreciation charge |
(14,427 | ) | (120,741 | ) | (9,386 | ) | (120,942 | ) | | | (265,496 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Closing net book amount |
35,721 | 3,947,053 | 47,698 | 6,543,126 | 1,154 | 1,139,869 | 11,714,621 | |||||||||||||||
At November 30, 2015 |
||||||||||||||||||||||
Cost |
70,100 | 1,823,303 | 50,957 | 3,238,359 | 1,154 | 236,633 | 5,420,506 | |||||||||||||||
Accumulated depreciation |
(43,987 | ) | | (27,844 | ) | | | | (71,831 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net book amount |
26,113 | 1,823,303 | 23,113 | 3,238,359 | 1,154 | 236,633 | 5,348,675 | |||||||||||||||
Year ended November 30, 2015 |
||||||||||||||||||||||
Opening net book amount |
22,737 | 1,085,406 | 20,693 | 2,525,175 | 1,029 | 505,314 | 4,160,354 | |||||||||||||||
Additions |
8,423 | 31,066 | 7,895 | 11,574 | 125 | 363,281 | 422,364 | |||||||||||||||
Reclassifications, net |
5,595 | 449,252 | 655 | 184,281 | | (639,783 | ) | | ||||||||||||||
Disposals, net |
(1,223 | ) | (18,054 | ) | (795 | ) | (5 | ) | | | (20,077 | ) | ||||||||||
Revaluationbook value |
| 260,713 | | 497,124 | | | 757,837 | |||||||||||||||
Revaluationaccumulated depreciation |
| 80,904 | | 76,353 | | | 157,257 | |||||||||||||||
Currency conversion |
38 | 14,920 | 525 | 20,210 | | 7,821 | 43,514 | |||||||||||||||
Depreciation charge |
(9,457 | ) | (80,904 | ) | (5,860 | ) | (76,353 | ) | | | (172,574 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Closing net book amount |
26,113 | 1,823,303 | 23,113 | 3,238,359 | 1,154 | 236,633 | 5,348,675 | |||||||||||||||
At November 30, 2014 |
||||||||||||||||||||||
Cost |
57,251 | 1,085,406 | 44,101 | 2,525,175 | 1,029 | 505,314 | 4,218,276 | |||||||||||||||
Accumulated depreciation |
(34,514 | ) | | (23,408 | ) | | | | (57,922 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net book amount |
22,737 | 1,085,406 | 20,693 | 2,525,175 | 1,029 | 505,314 | 4,160,354 | |||||||||||||||
Year ended November 30, 2014 |
||||||||||||||||||||||
Opening net book amount |
26,639 | 760,156 | 15,764 | 1,692,170 | 547 | 143,938 | 2,639,214 | |||||||||||||||
Additions |
4,898 | 44,696 | 8,018 | 144,184 | 482 | 363,647 | 565,925 | |||||||||||||||
Reclassifications, net |
| | | 18,992 | | (18,992 | ) | | ||||||||||||||
Disposals, net |
(982 | ) | (84 | ) | 303 | (26,980 | ) | | (4,882 | ) | (32,625 | ) | ||||||||||
Revaluationbook value |
| 267,848 | | 655,031 | | | 922,879 | |||||||||||||||
Revaluationaccumulated depreciation |
| 47,843 | | 58,646 | | | 106,489 | |||||||||||||||
Currency conversion |
765 | 12,791 | 1,726 | 41,777 | | 21,603 | 78,662 | |||||||||||||||
Depreciation charge |
(8,583 | ) | (47,844 | ) | (5,118 | ) | (58,645 | ) | | | (120,190 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Closing net book amount |
22,737 | 1,085,406 | 20,693 | 2,525,175 | 1,029 | 505,314 | 4,160,354 | |||||||||||||||
At December 1, 2013 |
||||||||||||||||||||||
Cost |
50,664 | 760,156 | 35,826 | 1,692,170 | 547 | 143,938 | 2,683,301 | |||||||||||||||
Accumulated depreciation |
(24,025 | ) | | (20,062 | ) | | | | (44,087 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net book amount |
26,639 | 760,156 | 15,764 | 1,692,170 | 547 | 143,938 | 2,639,214 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
F-43
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
6. Property, plant and equipment, net (Continued)
Revaluation of Property, plant and equipment
At the end of each reporting period, Management prepared updated assessments of the fair value of land, buildings, installations and machinery (classified as property, plant and equipment), taking into account independent valuations. The Directors determine these items of property, plant and equipment's value within a range of reasonable fair value estimates.
All resulting fair value estimates for properties are included in level 3. An explanation of each level is provided in Note 10.
Land, buildings and installations, and machinery, except for assets on third party property are carried at revalued amounts. The valuation procedure is in line with valuation hierarchy Level 3 of IFRS 13. The fair value of an asset is determined through market-based evidence, such as the replacement value considering state of preservation, degree of wear and tear and maintenance levels of those assets. Also, technological changes and improvements made to the original assets that allow them to maintain or improve the productivity of the group of assets are considered. Any accumulated depreciation balances prior to revaluations are eliminated. Changes in accumulated depreciation represent depreciation expense since revaluation.
The main level 3 inputs used by the group are derived and evaluated using the following asset revaluation techniques and assumptions described in Note 4(b).
There have been mills built in recent years by the Group and other players in the market and values have been within the assumed ranges.
The above mentioned assumptions are valid for the years 2016, 2015, 2014 and 2013 and were applied consistently. The main cause of the revaluation during this period is the devaluation of the peso against the US dollar, as the range of dollar values remained constant.
An increase of the rate per square meter, in the rate per milled ton or in the rate per stored capacity unobservable inputs results in an increase in fair value measurement. On the other hand, an increase in the level of wear and tear assumed results in a decrease in the fair value figures.
F-44
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
6. Property, plant and equipment, net (Continued)
Following are the carrying amounts that would have been recognized had the assets been carried under the cost model.
Class of property
|
Revalued amount | Value at cost | |||||
---|---|---|---|---|---|---|---|
At November 30, 2016 |
|||||||
Land, Buildings and Facilities |
6,543,126 | 1,432,702 | |||||
Machinery |
3,947,053 | 1,722,121 | |||||
At November 30, 2015 |
|||||||
Land, Buildings and Facilities |
3,238,359 | 641,439 | |||||
Machinery |
1,823,303 | 676,476 | |||||
At November 30, 2014 |
|||||||
Land, Buildings and Facilities |
2,525,175 | 462,747 | |||||
Machinery |
1,085,406 | 213,837 | |||||
At November 30, 2013 |
|||||||
Land, Buildings and Facilities |
1,692,170 | 300,061 | |||||
Machinery |
760,156 | 177,952 |
7. Investment property
Investment property consists primarily of land owned for appreciation. Changes in the Group's investment property for the years ended November 30, 2016, 2015 and 2014 were as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non Current |
||||||||||
At beginning of year |
72,626 | 70,337 | 577 | |||||||
Additions |
6,100 | 2,468 | 69,609 | |||||||
Reclassification to Property, plant and equipment |
(24,698 | ) | | | ||||||
Depreciation charge |
| | | |||||||
Currency conversion |
466 | (179 | ) | 151 | ||||||
| | | | | | | | | | |
At end of year |
54,494 | 72,626 | 70,337 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
As of November 30, 2016 the fair value of investment properties amounts to $62 million. Management prepared the fair value considering comparable values of certain qualified external appraisers (Level 2 of fair value hierarchy). Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premises being the m2 (square meters) and location.
Reclassification to Property, plant and equipment corresponds to certain properties previously classified in this category that the Group has decided to use.
F-45
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
8. Intangible assets, net
Changes in intangible assets for the years ended November 30, 2016, 2015, and 2014 were as follows:
|
Brands and Patents |
Software | Customer contracts |
Product Development |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2016 |
||||||||||||||||
Cost |
92,738 | 17,219 | 41,176 | 5,326 | 156,459 | |||||||||||
Accumulated depreciation |
(23,430 | ) | (10,712 | ) | (3,704 | ) | (4,142 | ) | (41,988 | ) | ||||||
| | | | | | | | | | | | | | | | |
Net book amount |
69,308 | 6,507 | 37,472 | 1,184 | 114,471 | |||||||||||
Year ended November 30, 2016 |
||||||||||||||||
Opening net book amount |
6,653 | 6,966 | | 740 | 14,359 | |||||||||||
Additions |
12 | 1,623 | | 844 | 2,479 | |||||||||||
Acquisition of businesses |
65,418 | | 41,176 | | 106,594 | |||||||||||
Disposals |
(198 | ) | | | | (198 | ) | |||||||||
Currency conversion |
669 | 1,094 | | | 1,764 | |||||||||||
Depreciation charge |
(3,246 | ) | (3,176 | ) | (3,704 | ) | (400 | ) | (10,527 | ) | ||||||
| | | | | | | | | | | | | | | | |
Closing net book amount |
69,308 | 6,507 | 37,472 | 1,184 | 114,471 | |||||||||||
At November 30, 2015 |
||||||||||||||||
Cost |
19,468 | 14,788 | | 4,482 | 38,738 | |||||||||||
Accumulated depreciation |
(12,815 | ) | (7,822 | ) | | (3,742 | ) | (24,379 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net book amount |
6,653 | 6,966 | | 740 | 14,359 | |||||||||||
Year ended November 30, 2015 |
||||||||||||||||
Opening net book amount |
8,997 | 6,371 | | 452 | 15,820 | |||||||||||
Additions |
40 | 2,467 | | 622 | 3,129 | |||||||||||
Disposals |
(30 | ) | | | | (30 | ) | |||||||||
Currency conversion |
225 | (218 | ) | | | 7 | ||||||||||
Depreciation charge |
(2,579 | ) | (1,654 | ) | | (334 | ) | (4,567 | ) | |||||||
| | | | | | | | | | | | | | | | |
Closing net book amount |
6,653 | 6,966 | | 740 | 14,359 | |||||||||||
At November 30, 2014 |
||||||||||||||||
Cost |
17,947 | 12,988 | | 3,860 | 34,795 | |||||||||||
Accumulated depreciation |
(8,950 | ) | (6,617 | ) | | (3,408 | ) | (18,975 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net book amount |
8,997 | 6,371 | | 452 | 15,820 | |||||||||||
Year ended November 30, 2014 |
||||||||||||||||
Opening net book amount |
5,271 | 4,232 | | 454 | 9,957 | |||||||||||
Additions |
3,973 | 2,490 | | 338 | 6,801 | |||||||||||
Currency conversion |
791 | 695 | | | 1,486 | |||||||||||
Depreciation charge |
(1,038 | ) | (1,046 | ) | | (340 | ) | (2,424 | ) | |||||||
| | | | | | | | | | | | | | | | |
Closing net book amount |
8,997 | 6,371 | | 452 | 15,820 | |||||||||||
At December 1, 2013 |
||||||||||||||||
Cost |
10,859 | 9,406 | | 3,522 | 23,787 | |||||||||||
Accumulated depreciation |
(5,588 | ) | (5,174 | ) | | (3,068 | ) | (13,830 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net book amount |
5,271 | 4,232 | | 454 | 9,957 |
F-46
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
8. Intangible assets, net (Continued)
In accordance with IAS 36, intangible assets with indefinite useful life have been tested for impairment at 30 November 2016. Please see Note 4(c) for more information related to impairment testing.
9. Investments in associates
Investments in associates at November 30, 2013 and November 30, 2014 correspond to holdings in Ilsington S.A. On November 11, 2015 the Group sold the ownership in Ilsington S.A. for USD 1.6 million (equivalent to $14,569). The transaction resulted in a profit of USD 1.5 million (equivalent to $13,916) and is reported in "Other operating income, net".
10. Financial assets at fair value
Financial assets at fair value at November 30, 2016, 2015, 2014 and 2013 include the following:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Terminales Graneleras Uruguayas S.A. |
| 26,158 | 23,015 | 16,581 | |||||||||
Argentina Government bondsBONAR4 |
| | | 999 | |||||||||
| | | | | | | | | | | | | |
Total |
| 26,158 | 23,015 | 17,580 | |||||||||
| | | | | | | | | | | | | |
F-47
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
10. Financial assets at fair value (Continued)
Financial instruments by category
The following tables shows the carrying amounts of financial assets and financial liabilities by category of financial instrument, as required by IFRS 13 and IFRS 7 for the years ended on November 30, 2016, 2015, 2014 and 2013.
|
|
At fair value | |
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2016
|
At amortized cost |
through profit or loss |
through OCI |
Total | Non- financial Items |
Total | |||||||||||||
Assets as per statement of financial position |
|||||||||||||||||||
Other receivables, net |
51,244 | | | 51,244 | 1,434,872 | 1,486,116 | |||||||||||||
Trade receivables |
5,592,599 | | | 5,592,599 | | 5,592,599 | |||||||||||||
Other investments |
15 | | | 15 | | 15 | |||||||||||||
Derivatives |
| 315,164 | | 315,164 | | 315,164 | |||||||||||||
Cash and cash equivalents |
3,564,103 | 230,564 | | 3,794,667 | | 3,794,667 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
9,207,961 | 545,728 | | 9,753,689 | 1,434,872 | 11,188,561 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities as per statement of financial position |
|||||||||||||||||||
Borrowings |
10,379,048 | | | 10,379,048 | | 10,379,048 | |||||||||||||
Derivatives |
| 1,154 | | 1,154 | | 1,154 | |||||||||||||
Trade and other accounts payable |
3,834,569 | 2,515,849 | | 6,350,418 | 448,168 | 6,798,586 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
14,213,617 | 2,517,003 | | 16,730,620 | 448,168 | 17,178,788 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
F-48
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
10. Financial assets at fair value (Continued)
|
|
At fair value | |
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2015
|
At amortized cost |
through profit or loss |
through OCI |
Total | Non- financial Items |
Total | |||||||||||||
Assets as per statement of financial position |
|||||||||||||||||||
Other receivables, net |
193,384 | | | 193,384 | 788,207 | 981,591 | |||||||||||||
Trade receivables |
4,387,018 | | | 4,387,018 | | 4,387,018 | |||||||||||||
Other investments |
133 | | | 133 | | 133 | |||||||||||||
Financial assets at fair value |
| 26,158 | | 26,158 | | 26,158 | |||||||||||||
Derivatives |
| 211,321 | | 211,321 | | 211,321 | |||||||||||||
Cash and cash equivalents |
926,192 | 17,539 | | 943,731 | 943,731 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
5,506,727 | 255,018 | | 5,761,745 | 788,207 | 6,549,952 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities as per statement of financial position |
|||||||||||||||||||
Borrowings |
5,114,836 | | | 5,114,836 | | 5,114,836 | |||||||||||||
Derivatives |
| 1,365 | | 1,365 | | 1,365 | |||||||||||||
Trade and other accounts payable |
2,881,240 | 1,097,164 | | 3,978,404 | 17,303 | 3,995,707 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
7,996,076 | 1,098,529 | | 9,094,605 | 17,303 | 9,111,908 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
|
At fair value | |
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2014
|
At amortized cost |
through profit or loss |
through OCI |
Total | Non- financial Items |
Total | |||||||||||||
Assets as per statement of financial position |
|||||||||||||||||||
Other receivables, net |
164,802 | | | 164,802 | 413,637 | 578,439 | |||||||||||||
Trade receivables, net |
2,846,578 | | | 2,846,578 | | 2,846,578 | |||||||||||||
Other investments |
344 | | | 344 | | 344 | |||||||||||||
Financial assets at fair value |
| 23,015 | | 23,015 | | 23,015 | |||||||||||||
Derivatives |
| 158,633 | | 158,633 | | 158,633 | |||||||||||||
Cash and cash equivalents |
936,943 | 184,408 | | 1,121,351 | | 1,121,351 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
3,948,667 | 366,056 | | 4,314,723 | 413,637 | 4,728,360 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities as per statement of financial position |
|||||||||||||||||||
Borrowings |
3,352,263 | | | 3,352,263 | | 3,352,263 | |||||||||||||
Derivatives |
| 27,479 | | 27,479 | | 27,479 | |||||||||||||
Trade and other accounts payable |
2,537,679 | 820,610 | | 3,358,289 | 3,094 | 3,361,383 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
5,889,942 | 848,089 | | 6,738,031 | 3,094 | 6,741,125 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
F-49
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
10. Financial assets at fair value (Continued)
|
|
At fair value | |
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At December 1, 2013
|
At amortized cost |
through profit or loss |
through OCI |
Total | Non- financial Items |
Total | |||||||||||||
Assets as per statement of financial position |
|||||||||||||||||||
Other receivables |
152,545 | | | 152,545 | 444,640 | 597,185 | |||||||||||||
Trade receivables, net |
2,140,152 | | | 2,140,152 | | 2,140,152 | |||||||||||||
Other investments |
1,807 | | | 1,807 | | 1,807 | |||||||||||||
Financial assets at fair value |
| 17,580 | | 17,580 | | 17,580 | |||||||||||||
Derivatives |
| 69,471 | | 69,471 | | 69,471 | |||||||||||||
Cash and cash equivalents |
865,445 | | | 865,445 | | 865,445 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
3,159,949 | 87,051 | | 3,247,000 | 444,640 | 3,691,640 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities as per statement of financial position |
|||||||||||||||||||
Borrowings |
2,856,515 | | | 2,856,515 | | 2,856,515 | |||||||||||||
Derivatives |
| 1,308 | | 1,308 | | 1,308 | |||||||||||||
Trade and other accounts payable |
1,720,429 | 180,805 | | 1,901,234 | 87,025 | 1,988,259 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
4,576,944 | 182,113 | | 4,759,057 | 87,025 | 4,846,082 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not differ significantly from their respective fair values.
Determining fair values
IFRS 13 defines the fair value of a financial instrument as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 7. This valuation hierarchy provides for three levels. The initial basis for the allocation is the "economic investment class". The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking.
Level 1: valuation is based on unadjusted quoted prices in active markets for identical financial assets that the Group can refer to at the date of the statement of financial position. A market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis.
Level 2: financial instruments are valued using models based on observable market data.
F-50
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
10. Financial assets at fair value (Continued)
Level 3: uses valuation techniques not based on inputs observable in the market, insofar as no observable market data are available. The inputs used reflect the Group's assumptions regarding the factors which market participants would consider in their pricing.
At November 30, 2016
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||||||
Cash and cash equivalents |
230,564 | | | 230,564 | |||||||||
Derivatives |
315,164 | | | 315,164 | |||||||||
| | | | | | | | | | | | | |
Total |
545,728 | | | 545,728 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Derivatives |
1,154 | | | 1,154 | |||||||||
Trade and other accounts payable |
| 2,515,849 | | 2,515,849 | |||||||||
| | | | | | | | | | | | | |
Total |
1,154 | 2,515,849 | | 2,517,003 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At November 30, 2015
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||||||
Financial assets at fair value |
| | 26,158 | 26,158 | |||||||||
Derivatives |
211,321 | | | 211,321 | |||||||||
Cash and cash equivalents |
17,539 | | | 17,539 | |||||||||
| | | | | | | | | | | | | |
Total |
228,860 | | 26,158 | 255,018 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Derivatives |
1,365 | | | 1,365 | |||||||||
Trade and other accounts payable |
| 1,097,164 | | 1,097,164 | |||||||||
| | | | | | | | | | | | | |
Total |
1,365 | 1,097,164 | | 1,098,529 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At November 30, 2014
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||||||
Financial assets at fair value |
| | 23,015 | 23,015 | |||||||||
Derivatives |
158,633 | | | 158,633 | |||||||||
Cash and cash equivalents |
184,408 | | | 184,408 | |||||||||
| | | | | | | | | | | | | |
Total |
343,041 | | 23,015 | 366,056 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Derivatives |
27,479 | | | 27,479 | |||||||||
Trade and other accounts payable |
| 820,610 | | 820,610 | |||||||||
| | | | | | | | | | | | | |
Total |
27,479 | 820,610 | | 848,089 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-51
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
10. Financial assets at fair value (Continued)
At December 1, 2013
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||||||
Derivatives |
69,471 | | | 69,471 | |||||||||
Financial assets at fair value |
| | 17,580 | 17,580 | |||||||||
| | | | | | | | | | | | | |
Total |
69,471 | | 17,580 | 87,051 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Derivatives |
1,308 | | | 1,308 | |||||||||
Trade and other accounts payable |
| 180,805 | | 180,805 | |||||||||
| | | | | | | | | | | | | |
Total |
1,308 | 180,805 | | 182,113 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Cash and cash equivalents includes mutual funds valued based on unadjusted quoted prices in active markets. Qualify as Level 1.
Derivatives: commodity future contracts are valued based on quoted prices in active grain markets. Qualify as Level 1.
Trade and other accounts payable: includes purchases of grains from producers with open prices. These liabilities are measured by valuing each ton of grain owed at fair value using prices quoted on active grain markets at the end of each year, adjusted by the contractual conditions specified by the Group. Qualify as Level 2.
Financial assets at fair value include:
11. Derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. The derivatives do not meet hedging criteria and they are classified as "fair value through profit or loss" for accounting purposes. The Group has the following derivative financial instruments:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets: |
|||||||||||||
Commodity future contracts |
315,164 | 211,321 | 158,633 | 69,471 | |||||||||
Current liabilities: |
|||||||||||||
Commodity future contracts |
1,154 | 1,365 | 27,479 | 1,310 |
F-52
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
12. Trade and other receivables, net
Trade receivables
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current |
|||||||||||||
Third party receivables |
4,559,893 | 2,378,470 | 1,517,872 | 1,001,954 | |||||||||
Notes receivable |
740,981 | 350,831 | 205,712 | 187,862 | |||||||||
Related party receivables (Note 29) |
18 | | | | |||||||||
Discounted notes |
332,009 | 1,682,711 | 1,152,460 | 971,675 | |||||||||
Non-performing receivables |
31,757 | 12,375 | 11,081 | 5,302 | |||||||||
Less: accrual for doubtful accounts |
(72,059 | ) | (41,808 | ) | (40,547 | ) | (26,641 | ) | |||||
| | | | | | | | | | | | | |
Total current trade receivables |
5,592,599 | 4,382,579 | 2,846,578 | 2,140,152 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Non Current |
|||||||||||||
Third party receivables |
| 4,439 | | | |||||||||
| | | | | | | | | | | | | |
Total non-current trade receivables |
| 4,439 | | | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other receivables
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non Current |
|||||||||||||
Prepaid expenses |
| | | 22,343 | |||||||||
Other receivablesrelated (Note 29) |
122,500 | | 5,479 | 3,541 | |||||||||
Income tax credits |
200,762 | 292 | 246 | 202 | |||||||||
Advances to supplier for purchase of PPE |
| 54,473 | 37,150 | 49,805 | |||||||||
Other trade receivables |
36,528 | 23,804 | 18,438 | 26,105 | |||||||||
| | | | | | | | | | | | | |
Total non-current Other receivables |
359,790 | 78,569 | 61,313 | 101,996 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Current |
|||||||||||||
Advances to suppliers |
75,331 | 268,495 | 52,351 | 67,294 | |||||||||
Employee loans and advances |
5,191 | 3,704 | 3,056 | 2,602 | |||||||||
Income tax credits |
208,568 | 121,783 | 110,808 | 28,907 | |||||||||
Other tax credits |
556,263 | 117,874 | 148,913 | 140,258 | |||||||||
Export refunds |
22,676 | 195,101 | 66,541 | 95,859 | |||||||||
Shareholders (Note 29) |
35,886 | | | | |||||||||
Directors (Note 29) |
33,190 | 14,093 | 36,228 | 34,254 | |||||||||
Other receivablesrelated (Note 29) |
10,026 | 41,990 | 9,718 | 52,758 | |||||||||
Compensations receivable |
44,256 | 11,408 | 12,892 | 13,518 | |||||||||
Grain future market warranties |
22,071 | 15,029 | 5,690 | 5,094 | |||||||||
Prepaid expenses and other receivables |
112,868 | 113,545 | 70,929 | 54,645 | |||||||||
| | | | | | | | | | | | | |
Total current Other receivables |
1,126,326 | 903,022 | 517,126 | 495,189 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current other receivables approximate their carrying amount, as the impact of discounting is not significant.
F-53
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
12. Trade and other receivables, net (Continued)
The carrying amounts of the trade receivables include discounted notes which were subject to a factoring arrangement. Under this arrangement, the Group has transferred the relevant receivables to the financial institution in exchange for cash. However, the Group has retained late payment and credit risk. The Group therefore continues to recognize the transferred assets in their entirety in its balance sheet. The amount repayable under the factoring agreement is presented as secured borrowing.
The carrying amounts of the Group's trade and other receivables are denominated in the following currencies, expressed in Argentine pesos:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentina pesos |
6,595,767 | 4,927,463 | 3,102,482 | 2,494,763 | |||||||||
Bolivianos |
2,208 | 835 | 674 | | |||||||||
Brazilian reales |
160,255 | 70,327 | 78,257 | 47,046 | |||||||||
Chilean pesos |
18,858 | 29,238 | 56,606 | 13,654 | |||||||||
Uruguay pesos |
29,572 | 20,448 | 39,066 | 31,277 | |||||||||
US Dollars (USD) |
272,055 | 320,298 | 147,932 | 150,597 | |||||||||
| | | | | | | | | | | | | |
Total |
7,078,715 | 5,368,609 | 3,425,017 | 2,737,337 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The Group recognizes an allowance for doubtful accounts receivable when there is objective evidence that it will not be able to collect all amounts due according to the original terms of the receivables. Management considers all available evidence in determining when a receivable is impaired, including delinquency in payments, aging of accounts, historic loss experience, customers' creditworthiness and changes in payment habits. Receivables not due may be provisioned if specific analysis indicates a potential impairment.
The following is the detail of the changes in the balances of the provision for doubtful accounts:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Beginning balance |
41,808 | 40,547 | 26,641 | |||||||
Increases |
21,002 | 4,629 | 12,979 | |||||||
Recoveries |
(2,640 | ) | (368 | ) | (619 | ) | ||||
Usage |
| | | |||||||
Effect of foreign exchange conversion |
11,889 | (3,000 | ) | 1,546 | ||||||
| | | | | | | | | | |
Total accrued |
72,059 | 41,808 | 40,547 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-54
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
12. Trade and other receivables, net (Continued)
The following is the aging of the not-accrued and accrued past due receivables at November 30, 2016, 2015, 2014 and 2013:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three to six months |
37,130 | 3,217 | 1,466 | 3,363 | |||||||||
Six to twelve months |
10,213 | 3,910 | 3,885 | 15,921 | |||||||||
More than one year |
9,288 | 6,670 | 1,578 | 652 | |||||||||
| | | | | | | | | | | | | |
Total past duenot impaired |
56,631 | 13,797 | 6,929 | 19,936 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Up to three months |
1,383 | 81 | 144 | 109 | |||||||||
Three to six months |
442 | 124 | 11 | 76 | |||||||||
Six to twelve months |
6,952 | 953 | 637 | 636 | |||||||||
More than one year |
63,282 | 40,650 | 39,755 | 25,820 | |||||||||
| | | | | | | | | | | | | |
Total impaired |
72,059 | 41,808 | 40,547 | 26,641 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
13. Inventories
The following table provides a breakdown of inventories
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Raw material |
487,183 | 424,434 | 438,505 | 242,598 | |||||||||
Finished goods |
1,721,175 | 942,345 | 721,811 | 493,742 | |||||||||
Packaging and other supplies |
262,404 | 164,996 | 123,404 | 86,044 | |||||||||
Imports in transit |
11,593 | 4,763 | 7,279 | 9,354 | |||||||||
Materials and supplies |
8,330 | 2,247 | 1,023 | 1,117 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
2,490,685 | 1,538,785 | 1,292,022 | 832,855 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The Group has no material obsolescence reserves of inventory recorded as of November 30, 2016, 2015, 2014 and 2013.
14. Cash and cash equivalents
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash |
2,909 | 2,614 | 2,490 | 13,587 | |||||||||
Cash in banks |
2,878,206 | 879,785 | 821,864 | 756,857 | |||||||||
Temporary investments |
913,552 | 61,332 | 296,997 | 95,001 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
3,794,667 | 943,731 | 1,121,351 | 865,445 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-55
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
14. Cash and cash equivalents (Continued)
Temporary investments consist of highly liquid short term investments in fixed term deposits and mutual funds.
The carrying amount of the Group's cash and cash equivalents is denominated in the following currencies, expressed in Argentina pesos:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentina pesos |
1,453,409 | 554,277 | 1,073,929 | 706,977 | |||||||||
Chilean pesos |
2,783 | 2,110 | 701 | 1,150 | |||||||||
Bolivianos |
1,051 | 2,304 | 46 | 4 | |||||||||
Chinese yuan |
244 | | | | |||||||||
Euros |
100 | | | | |||||||||
USD |
2,295,635 | 356,497 | 28,866 | 105,209 | |||||||||
Brazilian reales |
38,492 | 27,516 | 17,131 | 50,615 | |||||||||
Uruguay pesos |
2,953 | 1,027 | 678 | 1,490 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
3,794,667 | 943,731 | 1,121,351 | 865,445 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
15. Legal and other reserves
According to the laws of Argentina, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses.
In addition, from time to time, the subsidiaries of the Group may separate portions of their profits of the year to constitute voluntary reserves according to company law and practice. These voluntary reserves may be released for dividend distribution.
There are legal restrictions to distribute certain amounts corresponding to common stock and reserves in combined entities included in retained earnings in the consolidated combined statements of financial position. The amounts at November 30, 2016, 2015, 2014 and 2013 are the following:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Dec 1, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common Stock & Additional paid in Capital |
25,667 | 51,321 | 32,725 | 32,648 | |||||||||
Legal Reserve |
4,974 | 4,972 | 4,858 | 4,858 | |||||||||
Other Reserves |
9,157 | 9,111 | 6,942 | 5,902 | |||||||||
| | | | | | | | | | | | | |
|
39,798 | 65,404 | 44,525 | 43,408 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-56
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings
As of November 30, 2016, 2015, 2014 and 2013 the Group's financial liabilities amounted to:
Non current
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bank borrowings |
6,208,904 | 1,215,379 | 1,222,099 | 617,444 | |||||||||
Obligations under finance leases |
25,419 | 465 | 2,111 | 3,106 | |||||||||
| | | | | | | | | | | | | |
Total |
6,234,323 | 1,215,844 | 1,224,210 | 620,550 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Current
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bank borrowings |
3,945,596 | 2,071,284 | 952,231 | 1,261,075 | |||||||||
Debt certificates |
| 302,093 | 169,881 | 106,598 | |||||||||
Discounted notes |
184,506 | 1,518,667 | 1,002,047 | 864,976 | |||||||||
Obligations under finance leases |
14,623 | 6,948 | 3,894 | 3,315 | |||||||||
| | | | | | | | | | | | | |
Total |
4,144,725 | 3,898,992 | 2,128,053 | 2,235,964 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-57
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings (Continued)
The following table provides information on the main bank borrowings:
|
|
|
|
Amount due | |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bank
|
Borrowing date |
Amount | November 30, 2016 |
November 30, 2015 |
November 30, 2014 |
December 1, 2013 |
Maturity date |
|||||||||||||||
|
|
|
|
(in $) |
(in $) |
(in $) |
(in $) |
|
||||||||||||||
International Finance Corporation (sindicado con Rabobank) |
6/28/2016 | 80,000,000 | USD | 1,269,440 | | | | March 15, 2024 | ||||||||||||||
International Finance Corporation (sindicado con Rabobank) |
11/18/2016 | 75,000,000 | USD | 1,190,100 | | | | September 15, 2024 | ||||||||||||||
BANCO SANTANDER RIO |
6/2/2016 | 30,000,000 | USD | 476,040 | | | | June 2019 | ||||||||||||||
NATIXIS |
5/27/2016 | 25,000,000 | USD | 396,700 | | | | May 19, 2017 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
9/27/2016 | 10,000,000 | USD | 158,680 | | | | December 27, 2017 | ||||||||||||||
DEUTSCHE BANK |
7/23/2013 | 44,304,878 | USD | 501,704 | 127,768 | 99,577 | | March 20, 2024 | ||||||||||||||
BANKINTER |
11/18/2016 | 15,000,000 | USD | 238,020 | | | | November 17, 2019 | ||||||||||||||
BANCO CIUDAD DE BUENOS AIRES |
3/2/2013 | 18,000,000 | USD | 185,275 | 113,200 | 132,218 | 89,253 | March 2, 2025 | ||||||||||||||
BANCO DE CORDOBA |
11/13/2015 | 30,000,000 | $ | | 30,000 | | | January 14, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
7/31/2014 | 24,534,000 | $ | | 20,706 | 736 | | September 28, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
10/31/2016 | 4,300,000 | USD | 68,232 | | | | October 31, 2018 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
11/15/2016 | 5,600,000 | USD | 88,861 | | | | November 15, 2018 | ||||||||||||||
BANCO HIPOTECARIO |
12/13/2013 | 15,000,000 | $ | 1,667 | 8,333 | 15,000 | | December 13, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
9/24/2015 | 56,000,000 | $ | | 56,000 | | | May 30, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
8/10/2015 | 38,366,595 | $ | | 38,367 | | | September 29, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
11/3/2014 | 49,000,000 | $ | | 49,000 | 49,000 | | January 19, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
11/4/2015 | 75,000,000 | $ | | 75,000 | | | January 19, 2016 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
6/26/2013 | 20,000,000 | $ | | 6,667 | September 26, 2016 | ||||||||||||||||
BANCO SANTANDER RIO |
8/13/2015 | 30,000,000 | $ | | 27,020 | | | April 29, 2016 | ||||||||||||||
BANCO SANTANDER RIO |
8/14/2015 | 67,000,000 | $ | | 51,795 | | | April 29, 2016 | ||||||||||||||
BANCO CIUDAD DE BUENOS AIRES |
11/2/2015 | 50,000,000 | $ | | 50,000 | | | February 1, 2016 | ||||||||||||||
BANCO CORDOBA |
11/1/2013 | 6,000,000 | $ | | 2,002 | 4,000 | 6,000 | November 3, 2016 | ||||||||||||||
BANCO CORDOBA |
3/10/2013 | 13,000,000 | $ | | 1,444 | 5,778 | 10,111 | March 28, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
12/20/2013 | 8,000,000 | USD | | | 68,192 | 49,128 | November 4, 2015 | ||||||||||||||
HSBC |
7/10/2014 | 4,000,000 | USD | | | 716 | | December 9, 2014 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
11/27/2013 | 6,825,000 | USD | | | 17,965 | 21,573 | November 18, 2015 | ||||||||||||||
HSBC |
10/22/2012 | 4,000,000 | $ | | | 1,833 | 3,833 | October 19, 2015 | ||||||||||||||
CORPORACION INTERAMERICANA DE INVERSIONES |
5/29/2007 | 30,000,000 | USD | | | | 15,353 | March 17, 2014 | ||||||||||||||
BBVA FRANCES |
7/22/2013 | 32,400,000 | $ | | | | 32,400 | January 21, 2014 | ||||||||||||||
BANCO CORDOBA |
7/26/2013 | 21,000,000 | $ | | | | 21,000 | November 26, 2014 | ||||||||||||||
BANCO DE INVERSION Y COMERCIO EXTERIOR |
11/7/2016 | 10,084,000 | USD | 160,013 | | | | November 7, 2024 | ||||||||||||||
BANCO GALICIA |
11/7/2016 | 16,000,000 | USD | 253,888 | | | | February 8, 2018 | ||||||||||||||
BANCO HIPOTECARIO |
10/21/2016 | 23,000,000 | USD | 364,964 | | | | October 21, 2019 | ||||||||||||||
BANCO CIUDAD DE BUENOS AIRES |
10/14/2016 | 3,800,000 | USD | 60,298 | | | | September 29, 2019 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
10/15/2012 | 42,000,000 | $ | 9,625 | 20,125 | 30,625 | 41,125 | October 5, 2017 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
7/3/2015 | 30,000,000 | $ | 26,875 | 30,000 | | | June 8, 2020 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
7/3/2015 | 30,000,000 | $ | 26,875 | 30,000 | | | June 8, 2020 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
10/19/2015 | 50,000,000 | $ | 31,946 | 48,611 | | | October 3, 2018 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
8/31/2015 | 70,000,000 | $ | 66,111 | 70,000 | | February 8, 2021 | |||||||||||||||
RABOBANK |
11/18/2014 | 35,000,000 | USD | | 339,080 | 298,550 | | November 14, 2016 | ||||||||||||||
SINDICADO 2 (bancos Itaú, Hipotecario, HSBC, ICBC) |
11/20/2014 | 200,000,000 | $ | | 126,360 | 200,000 | | January 19, 2016 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
10/21/2015 | 130,000,000 | $ | | 130,000 | | | January 15, 2016 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
8/31/2012 | 263,000,000 | $ | | | 131,333 | 185,000 | October 21, 2015 | ||||||||||||||
BANCO CIUDAD DE BUENOS AIRES |
12/10/2012 | 10,000,000 | USD | 20,879 | December 10, 2013 | |||||||||||||||||
SINDICADO (bancos Itaú, Hipotecario, HSBC, ICBC) |
5/20/2013 | 200,000,000 | $ | | | 92,340 | 200,000 | May 20, 2015 | ||||||||||||||
BANCO ITAU |
11/14/2016 | 10,000,000 | USD | 158,680 | | | | November 9, 2017 | ||||||||||||||
FMO |
1/14/2016 | 100,000,000 | USD | 1,586,800 | | | | December 3, 2020 | ||||||||||||||
ABN AMRO BANK |
10/11/2016 | 25,000,000 | USD | 396,700 | | | | July 7, 2017 | ||||||||||||||
BLADEX |
11/8/2016 | 10,000,000 | USD | 158,680 | | | | February 6, 2017 | ||||||||||||||
BLADEX |
11/10/2016 | 10,000,000 | USD | 158,680 | | | | February 8, 2017 | ||||||||||||||
BANCO CIUDAD DE BUENOS AIRES |
11/28/2013 | 12,000,000 | USD | 95,208 | 58,128 | 102,288 | 74,092 | December 5, 2018 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
9/21/2016 | 50,000,000 | USD | 793,400 | | | | March 20,2017 | ||||||||||||||
IIG TOF |
10/19/2016 | 23,500,000 | USD | 372,898 | | | | June 15, 2017 | ||||||||||||||
BANCO DE CORDOBA |
10/1/2015 | 50,000,000 | $ | | 50,000 | | | January 1, 2016 | ||||||||||||||
BICSA |
8/27/2015 | 14,000,000 | USD | | 135,632 | | | Febraury 23, 2016 | ||||||||||||||
BANCO LA PAMPA |
10/29/2015 | 15,000,000 | $ | | 15,000 | | | April 26, 2016 | ||||||||||||||
BANCO SANTA FE |
11/2/2015 | 19,000,000 | $ | | 19,000 | | | May 2, 2016 | ||||||||||||||
RABOBANK |
10/1/2013 | 25,000,000 | USD | | 242,200 | 213,100 | 153,525 | June 2,2016 | ||||||||||||||
ICBC |
11/3/2014 | 9,500,000 | USD | | | 80,978 | | October 30, 2015 | ||||||||||||||
BANCO LA PAMPA |
10/8/2014 | 13,500,000 | $ | | | 13,500 | | April 6, 2015 | ||||||||||||||
BANCO DE CORDOBA |
11/1/2013 | 4,000,000 | USD | | | | 24,564 | April 30, 2014 |
F-58
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings (Continued)
|
|
|
|
Amount due | |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bank
|
Borrowing date |
Amount | November 30, 2016 |
November 30, 2015 |
November 30, 2014 |
December 1, 2013 |
Maturity date |
|||||||||||||||
|
|
|
|
(in $) |
(in $) |
(in $) |
(in $) |
|
||||||||||||||
BANCO GALICIA |
11/12/2013 | 7,000,000 | USD | | | | 42,987 | May 11, 2014 | ||||||||||||||
HSBC |
10/16/2013 | 38,500,000 | $ | | | | 38,500 | April 14, 2014 | ||||||||||||||
BANCO LA PAMPA |
10/7/2013 | 1,600,000 | USD | | | | 9,826 | April 4, 2014 | ||||||||||||||
BANCO DE LA NACION ARGENTINA (PREFI) |
10/7/2013 | 12,500,000 | USD | | | | 76,763 | May 20, 2014 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
9/26/2013 | 100,167,000 | $ | | | | 100,167 | October 21, 2014 | ||||||||||||||
BANCO SUPERVIELLE |
10/22/2013 | 2,000,000 | USD | | | | 12,282 | April 21, 2014 | ||||||||||||||
DEUTSCHE BANK |
10/30/2013 | 7,000,000 | USD | | | | 42,987 | April 28, 2014 | ||||||||||||||
BANCO SANTA FE |
10/1/2013 | 2,000,000 | USD | | | | 12,282 | June 28, 2014 | ||||||||||||||
BANCO HIPOTECARIO |
10/2/2013 | 15,000,000 | USD | | | | 92,115 | April 4, 2014 | ||||||||||||||
TOWER |
10/9/2013 | 3,000,000 | USD | | | | 18,423 | April 7, 2014 | ||||||||||||||
BST |
10/29/2013 | 10,000,000 | $ | | | | 10,000 | April 28, 2014 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
5/13/2013 | 10,000,000 | USD | | | | 61,410 | October 10, 2014 | ||||||||||||||
BANCO ITAU |
4/19/2013 | 10,000,000 | USD | 102,008 | 76,120 | 79,151 | 61,410 | April 19, 2021 | ||||||||||||||
SCOTIABANK |
6/28/2016 | 5,000,000 | USD | 79,340 | | | | December 26, 2016 | ||||||||||||||
SCOTIABANK |
4/26/2013 | 5,000,000 | USD | 46,282 | 36,330 | 39,068 | 30,705 | April 26, 2020 | ||||||||||||||
BANCO ITAU |
6/8/2016 | 1,000,000 | USD | 15,868 | | | | December 8, 2016 | ||||||||||||||
BANCO ITAU |
11/30/2016 | 1,313,451 | USD | 20,842 | | | | December 1, 2016 | ||||||||||||||
HSBC |
8/31/2016 | 11,776,379 | USD | 186,867 | | | | January 13, 2017 | ||||||||||||||
BANCO SANTANDER RIO |
11/11/2016 | 2,070,000 | USD | 32,847 | | | | January 10, 2017 | ||||||||||||||
BANCO SANTANDER RIO |
8/30/2016 | 430,000 | USD | 6,823 | | | | December 1, 2016 | ||||||||||||||
BANCO SANTANDER RIO |
2/24/2016 | 1,000,000 | USD | 8,079 | | | | August 24, 2017 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
8/15/2016 | 1,210,837 | USD | 19,042 | | | | December 13, 2016 | ||||||||||||||
HERITAGE |
10/1/2016 | 4,000,000 | USD | 63,472 | | | | November 30, 2016 | ||||||||||||||
BANCO DE LA NACION ARGENTINA |
9/5/2016 | 1,600,000 | USD | 25,389 | | | | December 5, 2016 | ||||||||||||||
BAF |
3/17/2016 | 2,000,000 | USD | 24,660 | | | | March 13, 2017 | ||||||||||||||
DISCOUNT BANK |
6/9/2015 | 1,500,000 | USD | | 14,532 | | | December 7, 2015 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES |
8/24/2016 | 1,400,000 | USD | | 13,563 | | | December 7, 2015 | ||||||||||||||
HSBC |
7/1/2015 | 2,000,000 | USD | | 19,376 | | | December 28, 2015 | ||||||||||||||
HSBC |
10/1/2015 | 6,000,000 | USD | | 58,128 | | | December 30, 2015 | ||||||||||||||
HSBC |
11/30/2015 | 1,100,000 | USD | | 7,521 | | | December 30, 2015 | ||||||||||||||
BANCO SANTANDER RIO |
10/26/2015 | 1,000,000 | USD | | 9,688 | | | January 25, 2016 | ||||||||||||||
BANCO SANTANDER RIO |
6/8/2015 | 1,500,000 | USD | | 10,350 | | | December 7, 2015 | ||||||||||||||
BANCO SANTANDER RIO |
6/16/2015 | 2,000,000 | USD | | 19,376 | | | December 14, 2015 | ||||||||||||||
HSBC |
10/1/2014 | 2,000,000 | USD | | | 17,048 | | December 30, 2014 | ||||||||||||||
HSBC |
11/10/2014 | 1,900,000 | USD | | | 4,544 | | December 1, 2014 | ||||||||||||||
BANCO SANTANDER RIO |
10/28/2014 | 1,000,000 | USD | | | 8,524 | | April 27, 2014 | ||||||||||||||
HSBC |
11/20/2013 | 1,470,000 | USD | | 7,121 | 10,442 | 9,027 | May 20, 2017 | ||||||||||||||
BBVA FRANCES |
8/6/2013 | 2,000,000 | USD | | | | 12,282 | December 2, 2013 | ||||||||||||||
BBVA |
8/30/2016 | 2,000,000 | USD | 31,736 | | | | November 30, 2016 | ||||||||||||||
BANCO DE CORDOBA |
5/30/2014 | 1,500,000 | $ | 504 | 1,002 | 1,500 | | November 30, 2017 | ||||||||||||||
BANCO DE CORDOBA |
11/1/2014 | 2,000,000 | $ | 1,001 | 1,667 | 2,000 | | May, 2018 | ||||||||||||||
BANCO DE CORDOBA |
12/1/2014 | 230,000 | $ | 123 | 204 | | | July , 2018 | ||||||||||||||
BANCO DE CORDOBA |
3/1/2015 | 2,070,000 | $ | 1,438 | 2,070 | | | December, 2018 | ||||||||||||||
BBVA FRANCES |
9/1/2015 | 4,500,000 | $ | 3,834 | 4,451 | | | October, 2020 | ||||||||||||||
BANCO HIPOTECARIO |
12/1/2015 | 14,000,000 | $ | 14,000 | | | | December, 2018 | ||||||||||||||
BANCO HIPOTECARIO |
1/1/2016 | 4,000,000 | $ | 4,000 | | | | January, 2019 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES1 |
12/1/2012 | 1,540,000 | $ | | 43 | 599 | 1,069 | December, 2015 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES2 |
2/1/2014 | 4,000,000 | $ | | 500 | 2,500 | | Febraury, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES3 |
11/1/2014 | 1,300,000 | $ | | | 1,300 | | November, 2015 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES4 |
4/1/2015 | 1,500,000 | $ | | 625 | | | April, 2016 | ||||||||||||||
BANCO DE LA PROVINCIA DE BUENOS AIRES5 |
11/1/2015 | 4,000,000 | $ | | 4,000 | | | November, 2016 | ||||||||||||||
BANCO RIO DE LA PLATA |
8/1/2015 | 3,000,000 | $ | | 2,250 | | | August, 2016 | ||||||||||||||
BBVA FRANCES |
11/1/2012 | 4,200,000 | $ | | 1,681 | 3,064 | December, 2015 | |||||||||||||||
ICBC |
11/1/2015 | 4,500,000 | $ | | 4,500 | | | December, 2015 | ||||||||||||||
BANCO GALICIA |
11/1/2015 | 6,000,000 | $ | | 6,000 | | | January, 2016 | ||||||||||||||
Financial debt with private parties |
10/30/2014 | 14,980,000 | USD | | | 127,690 | | April, 2015 | ||||||||||||||
Overdrafts |
| 747,877 | 126,831 | 112,916 | ||||||||||||||||||
Other borrowings |
169,986 | 267,932 | 193,721 | 182,469 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total Bank Borrowings |
10,154,500 | 3,286,663 | 2,174,330 | 1,878,519 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
F-59
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings (Continued)
During 2016, 2015 and 2014, the annual average weighted interest rate of borrowings in US Dollars is approximately 5.08%, 5.52% and 5.79%, while for borrowings in Argentina pesos they are 28.27%, 25.54% and 25.25%, respectively. Several of the abovementioned loans contain certain customary financial covenants and restrictions which require the Group to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. At November 30, 2016, 2015, 2014 and 2013, the Group was in compliance with financial covenants, except for the following Molino Cañuelas S.A.C.I.F.I.A. ratios related to the International Finance Corporation (IFC) loan as of November 30, 2016:
Those ratios were principally affected by the devaluation of the Argentine peso during the year ended November 30, 2016 and the fact that EBITDA for the year ended November 30, 2016 included only three months of the Cargill's business acquired operations detailed in note 30.3. The Group obtained a waiver from the lenders for the non-compliance of those financial covenants at the time the Group received the second loan disbursement (November 29, 2016).
For the majority of the borrowings, the fair values are not materially different to their carrying amounts, since the interest payable on those borrowings is either close to current market rates or the borrowings are of a short-term nature. The fair value of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in their fair value hierarchy (see Note 10) due to the use of unobservable inputs, including own credit risk.
The bank loans related to transferred receivables at November 30, 2016, 2015, 2014 and 2013 amounted to $332,009, $1,682,711, $1,152,460, $971,675 respectively (see Note 12).
The Group's main loans are described below:
International Finance Corporation (IFC)
During 2016, Molino Cañuelas received from International Finance Corporation (IFC) facility lines totaling USD 155 million corresponding to long-term loans structured as follows:
Funds have been primarily used for capital expenditures in the Group's industrial plants and working capital financing. These loans are guaranteed by Cañuelas Pack S.A. and have been secured with Molino Cañuelas plants as collateral.
Deutsche Bank
The Group obtained USD 44 million in credit facilities from Deutsche Bank to be used to finance investments in capital expenditures. Payment term conditions include a grace period ranging between
F-60
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings (Continued)
12 to 24 months and its maturity is in 8 years. The loan is guaranteed by Molino Cañuelas S.A. (Uruguay) and Hermes Insurance Company and have been secured with Molino Cañuelas plants as collateral.
FMO
Mid-term loan to Compañía Argentina de Granos S.A., used for pre-financing of exports and structured as follows:
The obligations under this facility are secured by certain accounts and other instruments related to certain designated sales contracts, pursuant to a security and accounts control agreement among FMO, the Group, as borrower, and Itaú Unibanco S.A., as collateral agent and depositary bank, entered into on December 1, 2016. These designated sales contracts correspond to contracts from a set of eligible off-takers that meet certain criteria (including the direct payment of any proceeds into a collection account and the notification of the Collateral Agent of their intention to designate these contracts). As part of its obligations under the account control agreement, the aggregate collateral value of the designated sales contracts in the collection account must be equal to 120% of the value of any outstanding loans under the FMO Loan.
In anticipation of the corporate reorganization, on December 1, 2016, the FMO facility was amended and restated and Molino Cañuelas SACIFIA assumed all of the rights and obligations of Compañía Argentina de Granos S.A.
Banco Santander Río
Mid-term investment loan with a grace period of 18 months and a maturity of 3 years.
The carrying amount of the Group's borrowings is denominated in the following currencies, expressed in Argentina pesos:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentina pesos |
371,694 | 3,596,382 | 1,859,373 | 1,762,849 | |||||||||
Brazilian reales |
| 5,519 | | 12,008 | |||||||||
Chilean pesos |
| 16,998 | 17,069 | 2,550 | |||||||||
US dollars |
10,007,354 | 1,495,937 | 1,475,821 | 1,079,107 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
10,379,048 | 5,114,836 | 3,352,263 | 2,856,514 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-61
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
16. Borrowings (Continued)
Collateral
The Group keeps several of its fixed assets as collateral for its borrowings with financial institutions. As of November 30, 2016, 2015, 2014 and 2013 the collateral maintained with these financial institutions is as follows:
|
Restricted Asset | Amount due to bank | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Plant
|
2016 | 2015 | 2014 | 2013 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||
Cañuelas/ Adelia Maria (Land, buildings & machinery) |
| 1,502,773 | 1,256,767 | | | 339,325 | 298,550 | | |||||||||||||||||
Cañuelas (Machinery) |
941,886 | | | | 501,699 | | | | |||||||||||||||||
Cañuelas / Salta (Land, buildings & machinery) |
| 1,272,125 | | | | 59,064 | | | |||||||||||||||||
Cañuelas/ Adelia Maria / Pilar/ Spegazzini / Rosario (Land, buildings & machinery) |
4,498,725 | | | | 2,459,540 | | | | |||||||||||||||||
Salta (Land, buildings & machinery) |
| | 112,844 | 83,230 | | | 17,969 | 21,573 | |||||||||||||||||
Spegazzini (Land & buildings) |
603,756 | 364,776 | 111,129 | 36,069 | 185,275 | 113,200 | 132,218 | 89,253 | |||||||||||||||||
Spegazzini (Machinery) |
494,185 | | | | 160,025 | | | |
Restricted assets are recorded in Property, plant and equipment in the combined statements of financial position and the amounts due to bank are recorded in Borrowings.
17. Consolidated structured entities
The Group has securitized certain of their account receivables (notes and credit invoices) originated by Compañía Argentina de Granos S.A. on their behalf through the transfers of such accounts receivable to financial trusts which issue multiple classes of bonds and certificates of participation.
F-62
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
17. Consolidated structured entities (Continued)
The following table details financial trusts setup by the Group:
Financial trust
|
Set up on | Value initially assigned to the trust |
Securities issued and last maturity |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
CAGSA I |
02/10/2011 | 74,933 | DC | ||||||||||
|
NV 74,933 | ||||||||||||
CAGSA II |
02/10/2011 | 43,071 | DC | ||||||||||
|
NV 43,071 | ||||||||||||
FACTURAS IV |
09/07/2015 | 164,285 | DC | PC | |||||||||
|
NV 129,128 | NV 35,157 | |||||||||||
|
02/01/2017 | 02/01/2017 | |||||||||||
FACTURAS V |
09/22/2015 | 207,145 | DC | PC | |||||||||
|
NV 165,716 | NV 41,429 | |||||||||||
|
04/01/2017 | 04/01/2017 |
DC: Debt certificate, PC: participation certificate
The Group controls a financial trust when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Financial trusts are fully consolidated from the date on which control is obtained by the Group. They are deconsolidated from the date that control ceases.
The Group has evaluated the following considerations:
Based on the above the Group has concluded that it has control of these financial trusts. As a consequence, these entities have been consolidated.
The table below presents the carrying amount and classification of the Special Purpose Trusts' assets and liabilities which have been consolidated as of November 30, 2015 and 2014. The consolidated four financial trusts which existed as of November 30, 2015 and 2014 were liquidated during the fiscal year ended November 30, 2016. We discontinued this practice as a means of financing during the year ended November 30, 2016 as a result of the relative increase in financial costs associated with such
F-63
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
17. Consolidated structured entities (Continued)
types of securitization transactions. As such, we no long have any interests in any trusts as of November 30, 2016.
Assets
|
Nov 30, 2015 | Nov 30, 2014 | |||||
---|---|---|---|---|---|---|---|
Accounts receivable |
468,149 | 176,162 | |||||
Investments |
16,086 | 6,899 | |||||
Cash and cash equivalents |
5,366 | 990 | |||||
| | | | | | | |
Total Assets |
489,601 | 184,051 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities
|
Nov 30, 2015 | Nov 30, 2014 | |||||
---|---|---|---|---|---|---|---|
Debt certificates |
489,434 | 183,858 | |||||
Other Accounts payable |
167 | 193 | |||||
| | | | | | | |
Total Assets |
489,601 | 184,051 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
18. Trade and other payables
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Nov 30, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non Current |
|||||||||||||
Trade accounts payable |
|||||||||||||
Third parties |
4,486 | 7,650 | 68,360 | 9,098 | |||||||||
Related (Note 29) |
184,555 | | | | |||||||||
Dividends payable (Note 29) |
| 6,200 | 4,400 | 4,400 | |||||||||
| | | | | | | | | | | | | |
Total |
189,041 | 13,850 | 72,760 | 13,498 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Current |
|||||||||||||
Trade accounts payable |
|||||||||||||
Third parties |
2,358,075 | 1,787,289 | 1,546,314 | 1,204,755 | |||||||||
Related (Note 29) |
476 | 938 | 13,557 | 9,822 | |||||||||
Notes payable |
849,130 | 817,927 | 628,079 | 314,137 | |||||||||
Customer advances |
446,704 | 17,303 | 3,094 | 87,025 | |||||||||
Other accounts payable |
|||||||||||||
Third parties |
2,162,159 | 1,142,588 | 925,287 | 233,652 | |||||||||
Related (Note 29) |
5,117 | | | | |||||||||
Other taxes payable |
247,885 | 79,148 | 62,585 | 40,783 | |||||||||
Salaries and social securities payable |
128,203 | 69,302 | 52,076 | 35,786 | |||||||||
Vacation and 13th month accrual |
152,413 | 47,710 | 43,590 | 29,579 | |||||||||
Provision for Directors and Syndic fees |
19,587 | 6,989 | 9,005 | 4,350 | |||||||||
Dividends payable (Note 29) |
213,280 | | | | |||||||||
Amounts due to Directors (Note 29) |
26,516 | 12,663 | 5,036 | 14,872 | |||||||||
| | | | | | | | | | | | | |
Total |
6,609,545 | 3,981,857 | 3,288,623 | 1,974,761 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-64
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
18. Trade and other payables (Continued)
The non-current trade accounts payable with related parties include $188,555 related to the acquisition of MOLCA S.A.'s port business. The Group agreed to assume bank borrowings that are pending approval by the bank.
The carrying value of the Group's trade and other payables are denominated in the following currencies, expressed in Argentine pesos:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Nov 30, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentina pesos |
5,363,992 | 3,373,776 | 2,732,508 | 1,562,299 | |||||||||
Bolivianos |
1,940 | 4,053 | 999 | | |||||||||
Chilean pesos |
25,521 | 12,808 | 31,774 | 937 | |||||||||
Brazilian Reales |
63,143 | 17,522 | 19,925 | 18,371 | |||||||||
Uruguay pesos |
60,424 | 15,962 | 14,230 | 13,409 | |||||||||
Euros |
68,249 | 38,684 | 12,708 | 15,467 | |||||||||
US Dollars |
1,215,316 | 532,902 | 549,239 | 377,776 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
6,798,585 | 3,995,707 | 3,361,383 | 1,988,259 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The fair values of current trade and other payables approximate their respective carrying values due to their short-term nature. The fair values of non-current trade and other payables approximate their carrying value, as the impact of discounting is not significant.
19. Provisions
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Nov 30, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current |
|||||||||||||
Labor |
64,003 | 25,906 | 13,567 | 10,139 | |||||||||
Commercial |
| 907 | | | |||||||||
Other |
3,786 | 836 | 33 | 73 | |||||||||
| | | | | | | | | | | | | |
TOTAL |
67,789 | 27,649 | 13,600 | 10,212 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-65
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
19. Provisions (Continued)
Changes in Provisions for the years ended November 30, 2016, 2015, and 2014 were as follows:
|
Other | Labor | Commercial | |||||||
---|---|---|---|---|---|---|---|---|---|---|
At November 30, 2013 |
361 | 9,851 | | |||||||
Increases |
| 2,171 | 858 | |||||||
Recoveries |
(89 | ) | | | ||||||
Forex exchange conversion |
118 | 190 | 139 | |||||||
| | | | | | | | | | |
Total at November 30, 2014 |
390 | 12,212 | 997 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
At November 30, 2014 |
390 | 12,212 | 997 | |||||||
Increases |
380 | 14,053 | | |||||||
Recoveries |
| (418 | ) | (213 | ) | |||||
Forex exchange conversion |
66 | 59 | 123 | |||||||
| | | | | | | | | | |
Total at November 30, 2015 |
836 | 25,906 | 907 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
At November 30, 2015 |
836 | 25,906 | 907 | |||||||
Increases |
2,386 | 37,985 | | |||||||
Recoveries |
| (140 | ) | (1,345 | ) | |||||
Forex exchange conversion |
564 | 252 | 438 | |||||||
| | | | | | | | | | |
Total at November 30, 2016 |
3,786 | 64,003 | | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
20. Taxation
The Group's income tax expense comprises the charge for income tax currently payable or deferred attributable to the Group's subsidiaries and combined entities in their taxable jurisdictions. Income tax is recognized in the statement of comprehensive income, except to the extent that it relates to items recognized directly in equity, in which case, it is also recognized in equity.
The operating subsidiaries and combined entities are required to calculate and file their income tax returns on a separate basis rather than preparing a combined tax return. Therefore, operating subsidiaries and combined entities are not allowed to offset income from one subsidiary with losses from another.
The details of the provision for the Group's income tax are as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Current income tax |
136,046 | 109,092 | 102,087 | |||||||
Difference in prior year tax payment |
24,049 | (4,209 | ) | 12,402 | ||||||
Deferred income tax |
(134,832 | ) | (56,710 | ) | (46,093 | ) | ||||
| | | | | | | | | | |
Total income tax |
25,263 | 48,173 | 68,396 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-66
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
20. Taxation (Continued)
The statutory income tax rates in each of the countries where the Group has a legal entity are the following:
|
2016 | 2015 | 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Argentina |
35.0 | % | 35.0 | % | 35.0 | % | ||||
Brazil |
34.0 | % | 34.0 | % | 34.0 | % | ||||
Bolivia |
25.0 | % | 25.0 | % | 25.0 | % | ||||
Chile |
24.0 | % | 22.5 | % | 21.0 | % | ||||
Uruguay |
25.0 | % | 25.0 | % | 25.0 | % | ||||
| | | | | | | | | | |
The movement in the deferred income tax assets and liabilities during the years ending on November 30, 2016, 2015 and 2014, without taking into consideration the offsetting of balances within the same tax jurisdiction is as follows:
|
Nov 30, 2015 |
Charged to Profit or Loss |
Charged to OCI |
Acquisition of business |
Currency conversion |
Acquisition of combined business |
Nov 30, 2016 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tax losses |
96,952 | 103,925 | | | (2,205 | ) | | 198,672 | ||||||||||||||
Property, plant and equipment |
(1,414,429 | ) | (9,069 | ) | (1,028,497 | ) | (618,441 | ) | (11,831 | ) | 47,877 | (3,034,390 | ) | |||||||||
Intangible property |
| | | (783 | ) | | | (783 | ) | |||||||||||||
Inventory valuation |
56,239 | 49,693 | | | (80 | ) | | 105,852 | ||||||||||||||
Doubtful accounts receivable |
6,590 | 3,128 | | | 351 | | 10,069 | |||||||||||||||
Other assets |
(604 | ) | (30,697 | ) | | | (440 | ) | | (31,741 | ) | |||||||||||
Employee benefits |
12,339 | 31,906 | | | | | 44,245 | |||||||||||||||
Other liabilities |
9,423 | (14,054 | ) | | | | | (4,631 | ) | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net deferred tax balance |
(1,233,490 | ) | 134,832 | (1,028,497 | ) | (619,224 | ) | (14,205 | ) | 47,877 | (2,712,707 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
Nov 30, 2014 |
Charged to Profit or Loss |
Charged to OCI |
Acquisition of business |
Currency conversion |
Acquisition of combined business |
Nov 30, 2015 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tax losses |
98,444 | (869 | ) | | | (623 | ) | | 96,952 | |||||||||||||
Property, plant and equipment |
(1,071,319 | ) | (14,507 | ) | (320,531 | ) | | (8,072 | ) | | (1,414,429 | ) | ||||||||||
Inventory valuation |
(8,277 | ) | 64,523 | | | (7 | ) | | 56,239 | |||||||||||||
Doubtful accounts receivable |
5,500 | 1,045 | | | 45 | | 6,590 | |||||||||||||||
Other receivables |
1,016 | (1,016 | ) | | | | | | ||||||||||||||
Other assets |
601 | (1,136 | ) | | | (69 | ) | | (604 | ) | ||||||||||||
Employee benefits |
4,960 | 7,379 | | | | | 12,339 | |||||||||||||||
Other liabilities |
8,132 | 1,291 | | | | | 9,423 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net deferred tax balance |
(960,943 | ) | 56,710 | (320,531 | ) | | (8,726 | ) | | (1,233,490 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
F-67
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
20. Taxation (Continued)
|
Nov 30, 2013 |
Charged to Profit or Loss |
Charged to OCI |
Acquisition of business |
Currency conversion |
Acquisition of combined business |
Nov 30, 2014 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tax losses |
70,231 | 28,213 | | | | | 98,444 | |||||||||||||||
Property, plant and equipment |
(690,639 | ) | (9,623 | ) | (360,525 | ) | | (10,532 | ) | | (1,071,319 | ) | ||||||||||
Inventory valuation |
(6,067 | ) | (2,210 | ) | | | | | (8,277 | ) | ||||||||||||
Doubtful accounts receivable |
2,581 | 2,919 | | | | | 5,500 | |||||||||||||||
Other receivables |
43 | 973 | | | | | 1,016 | |||||||||||||||
Other assets |
(4,415 | ) | 5,016 | | | | | 601 | ||||||||||||||
Employee benefits |
3,288 | 1,672 | | | | | 4,960 | |||||||||||||||
Other liabilities |
(11,825 | ) | 19,133 | | | 824 | | 8,132 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Net deferred tax balance |
(636,803 | ) | 46,093 | (360,525 | ) | | (9,708 | ) | | (960,943 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
The expiration dates for tax loss carry forwards are as follows:
Tax loss carry forward expiration
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
3 years |
126 | 644 | 61 | |||||||
5 years |
184,917 | 78,114 | 77,455 | |||||||
No expiration |
13,629 | 18,194 | 20,928 | |||||||
| | | | | | | | | | |
|
198,672 | 96,952 | 98,444 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The income tax on the Group's profit before tax differs from the theoretical amount that would arise using the statutory tax rate applicable to profits of the combined entities as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Profit before income tax |
952,645 | 60,104 | 230,536 | |||||||
Statutory tax rate |
35 | % | 35 | % | 35 | % | ||||
Tax calculated at statutory rate |
333,426 | 21,036 | 80,687 | |||||||
Elimination of effects of |
||||||||||
Non-taxable income and related expenses |
11,366 | (20,020 | ) | (43,154 | ) | |||||
Non-deductible expenses |
73,232 | 39,440 | 33,295 | |||||||
Transfer price adjustments |
245 | 844 | 1,484 | |||||||
Presumed interest |
| 923 | 608 | |||||||
Incentive |
(37,970 | ) | (8,692 | ) | (789 | ) | ||||
Effect of acquisition of business |
(379,514 | ) | | | ||||||
Effect of tax rate differences |
8,026 | 1,958 | 375 | |||||||
Other |
16,452 | 12,684 | (4,110 | ) | ||||||
| | | | | | | | | | |
Total tax booked |
25,263 | 48,173 | 68,396 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-68
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
20. Taxation (Continued)
SUDENE
Since 2013, Moinho Canuelas Ltda. is a beneficiary of a 10 year tax incentive consisting of a 75% reduction of the income tax and additional tax in the industrialization of wheat and bran manufacture of wheat in its unit in Salvador, Brazil. The incentives are calculated on the operating profit resulting from the total modernization of its installed capacity. Tax incentives are recognized on a monthly basis in the combined statements of comprehensive income for the period, on the date of their calculation.
Deferred tax assets and liabilities of the Group as of November 30, 2016, 2015, 2014 and 2013, will be recovered or settled as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Nov 30, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Deferred income tax asset, net to be recovered after 12 months |
34,350 | 18,478 | 21,232 | 6,519 | |||||||||
Deferred income tax asset, net to be recovered within 12 months |
| | | | |||||||||
| | | | | | | | | | | | | |
Deferred income tax assets, net |
34,350 | 18,478 | 21,232 | 6,519 | |||||||||
Deferred income tax liability, net to be settled after 12 months |
(2,691,456 | ) | (1,233,039 | ) | (970,698 | ) | (637,410 | ) | |||||
Deferred income tax liability, net to be settled within 12 months |
(55,601 | ) | (18,929 | ) | (11,477 | ) | (5,912 | ) | |||||
| | | | | | | | | | | | | |
Deferred income tax liability, net |
(2,747,057 | ) | (1,251,968 | ) | (982,175 | ) | (643,322 | ) | |||||
| | | | | | | | | | | | | |
Deferred income tax assets / (liabilities), net |
(2,712,707 | ) | (1,233,490 | ) | (960,943 | ) | (636,803 | ) | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-69
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
21. Sales
Sales to third parties by business line within each of the defined business segments for the years ended November 30, 2016, 2015 and 2014 are as follows:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Net sales |
||||||||||
Sustainable sourcing |
12,766,349 | 6,731,328 | 7,925,441 | |||||||
Agro-Services |
4,432,136 | 2,771,645 | 2,631,914 | |||||||
Port and Logistics |
120,028 | 136,908 | 142,215 | |||||||
| | | | | | | | | | |
Total Agro-services and sustainable sourcing |
17,318,513 | 9,639,881 | 10,699,570 | |||||||
Wheat flour |
4,311,624 | 2,045,939 | 2,431,303 | |||||||
Soybean flour, oil and co products |
6,767,760 | 7,764,794 | 4,139,448 | |||||||
Packaging (Cañuelas Pack) |
184,495 | 223,233 | 158,276 | |||||||
Other products |
17,670 | | | |||||||
| | | | | | | | | | |
Total Branded industrial products |
11,281,549 | 10,033,966 | 6,729,027 | |||||||
Vegetable Oil |
1,364,457 | 822,594 | 654,197 | |||||||
Flour |
1,239,125 | 876,236 | 1,110,937 | |||||||
Biscuits, cookies and crackers |
685,578 | 461,663 | 372,781 | |||||||
Pasta |
78,252 | 90,732 | 104,228 | |||||||
Ready-mixed flour |
53,224 | 56,110 | 43,573 | |||||||
Frozen products |
160,457 | 21,811 | | |||||||
Bread crumbs |
121,207 | 92,069 | 106,178 | |||||||
Other products |
15,338 | 39,330 | 708 | |||||||
| | | | | | | | | | |
Total Retail products |
3,717,638 | 2,460,545 | 2,392,602 | |||||||
| | | | | | | | | | |
Total net sales |
32,317,700 | 22,134,392 | 19,821,199 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
22. Cost of sales
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Inventories beginning balance |
1,538,785 | 1,292,022 | 832,855 | |||||||
Purchases |
24,510,832 | 16,513,884 | 15,537,550 | |||||||
Acquisition of business |
220,553 | | | |||||||
Vegetable oil private compensation |
(460,342 | ) | (157,826 | ) | (152,338 | ) | ||||
Export duty refunds |
(1,189 | ) | (1,160 | ) | (2,051 | ) | ||||
By-product sales |
(307,294 | ) | (226,782 | ) | (212,924 | ) | ||||
Manufacturing expenses (Note 23) |
2,071,427 | 1,307,609 | 956,782 | |||||||
Inventories ending balance |
(2,490,685 | ) | (1,538,785 | ) | (1,292,022 | ) | ||||
| | | | | | | | | | |
Total Cost of sales |
25,082,087 | 17,188,962 | 15,667,852 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Private compensation grants related to "Argentina vegetable oil domestic market compensation trust" are deducted from Cost of sales (Note 2.21). There are no unfulfilled conditions or other contingencies attaching to these grants.
F-70
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
23. Expenses by nature
The Group presented the statement of comprehensive income under the function of expense method. Under this method, expenses are classified according to their function as part of the line items "cost of salesmanufacturing expenses", "general and administrative expenses" and "selling expenses".
The following table provides the additional disclosure required on the nature of expenses and their relationship to the function:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Professional fees and contract services |
76,076 | 71,563 | 64,007 | |||||||
Director fees |
122,640 | 11,597 | 33,725 | |||||||
Salaries and fringes |
1,373,114 | 901,097 | 661,881 | |||||||
Employee related expenses |
192,097 | 85,286 | 52,899 | |||||||
Provisions |
38,886 | 13,802 | 2,940 | |||||||
Promotion, advertising and research expenses |
47,939 | 34,959 | 26,109 | |||||||
Taxes |
518,614 | 299,117 | 266,843 | |||||||
Depreciation & Amortization |
276,023 | 177,141 | 122,614 | |||||||
Maintenance and repairs |
236,746 | 150,788 | 149,087 | |||||||
Utilities |
259,784 | 150,921 | 111,262 | |||||||
Freight and delivery expenses |
708,795 | 502,873 | 386,169 | |||||||
Commissions |
250,950 | 149,567 | 135,423 | |||||||
Bank charges |
17,556 | 30,834 | 27,270 | |||||||
Contract manufacturing |
304,034 | 152,353 | 64,965 | |||||||
Travel expenses |
77,915 | 54,305 | 44,633 | |||||||
Office supplies |
12,600 | 12,358 | 10,624 | |||||||
Exports duties and expenses |
2,562,995 | 2,400,148 | 2,063,378 | |||||||
Allowance for doubtful accounts |
18,362 | 4,261 | 12,360 | |||||||
Rent |
86,877 | 46,330 | 36,893 | |||||||
Materials and supplies |
34,944 | 12,436 | 6,155 | |||||||
Miscellaneous expenses |
100,239 | 103,465 | 88,699 | |||||||
| | | | | | | | | | |
Total |
7,317,186 | 5,365,201 | 4,367,936 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-71
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
23. Expenses by nature (Continued)
Manufacturing expenses
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Professional fees and contract services |
12,621 | 7,881 | 8,574 | |||||||
Salaries and fringes |
802,458 | 530,075 | 383,496 | |||||||
Employee related expenses |
114,929 | 53,899 | 38,724 | |||||||
Promotion, advertising and research expenses |
7,981 | 2,684 | 1,503 | |||||||
Taxes |
5,987 | 6,202 | 3,244 | |||||||
Depreciation & Amortization |
256,683 | 159,951 | 107,347 | |||||||
Maintenance and repairs |
200,636 | 129,403 | 130,496 | |||||||
Utilities |
246,541 | 141,864 | 102,929 | |||||||
Freight and delivery expenses |
540 | 26,201 | 29,267 | |||||||
Commissions |
| 7,494 | 7,874 | |||||||
Contract manufacturing |
304,034 | 152,353 | 64,965 | |||||||
Travel expenses |
17,203 | 10,438 | 8,874 | |||||||
Office supplies |
1,695 | 961 | 1,096 | |||||||
Rent |
14,645 | 20,984 | 18,465 | |||||||
Materials and supplies |
34,944 | 12,436 | 6,155 | |||||||
Miscellaneous expenses |
50,530 | 44,783 | 43,773 | |||||||
| | | | | | | | | | |
Total |
2,071,427 | 1,307,609 | 956,782 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Selling expenses
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Professional fees and contract services |
14,509 | 12,443 | 10,287 | |||||||
Salaries and fringes |
236,706 | 149,149 | 125,116 | |||||||
Employee related expenses |
24,231 | 7,517 | 4,576 | |||||||
Allowance for doubtful accounts |
18,362 | 4,261 | 12,360 | |||||||
Promotion, advertising and research expenses |
25,474 | 18,972 | 14,952 | |||||||
Taxes |
492,568 | 277,742 | 207,229 | |||||||
Depreciation & Amortization |
4,411 | 3,488 | 3,132 | |||||||
Maintenance and repairs |
7,795 | 4,743 | 3,767 | |||||||
Utilities |
2,986 | 1,175 | 977 | |||||||
Freight and delivery expenses |
707,407 | 476,019 | 356,390 | |||||||
Commissions |
250,950 | 142,073 | 127,549 | |||||||
Travel expenses |
25,174 | 18,526 | 16,068 | |||||||
Office supplies |
384 | 363 | 182 | |||||||
Exports duties and expenses |
2,562,995 | 2,400,148 | 2,063,378 | |||||||
Rent |
27,494 | 6,558 | 3,150 | |||||||
Miscellaneous expenses |
17,026 | 23,810 | 18,309 | |||||||
| | | | | | | | | | |
Total |
4,418,472 | 3,546,987 | 2,967,422 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-72
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
23. Expenses by nature (Continued)
General and administrative expenses
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Professional fees and contract services |
48,946 | 51,239 | 45,146 | |||||||
Director fees |
122,640 | 11,597 | 33,725 | |||||||
Salaries and fringes |
333,950 | 221,873 | 153,269 | |||||||
Employee related expenses |
52,937 | 23,870 | 9,599 | |||||||
Provisions |
38,886 | 13,802 | 2,940 | |||||||
Promotion, advertising and research expenses |
14,484 | 13,303 | 9,654 | |||||||
Taxes |
20,059 | 15,173 | 56,370 | |||||||
Depreciation & Amortization |
14,929 | 13,702 | 12,135 | |||||||
Maintenance and repairs |
28,315 | 16,642 | 14,824 | |||||||
Utilities |
10,257 | 7,882 | 7,356 | |||||||
Freight and delivery expenses |
848 | 653 | 512 | |||||||
Bank charges |
17,556 | 30,834 | 27,270 | |||||||
Travel expenses |
35,538 | 25,341 | 19,691 | |||||||
Office supplies |
10,521 | 11,034 | 9,346 | |||||||
Rent |
44,738 | 18,788 | 15,278 | |||||||
Miscellaneous expenses |
32,683 | 34,872 | 26,617 | |||||||
| | | | | | | | | | |
Total |
827,287 | 510,605 | 443,732 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
24. Other operating income, net
Other income/(expenses) net
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Income from sale of Property, plant and equipment |
2,271 | 4,852 | 940 | |||||||
Recovery of expenses |
(485 | ) | 819 | 7,262 | ||||||
Income from sale of equity investments |
4,310 | 13,875 | | |||||||
Other income |
4,786 | 8,091 | 15,886 | |||||||
| | | | | | | | | | |
TOTAL |
10,882 | 27,637 | 24,088 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-73
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
25. Financial results, net
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Financial income |
||||||||||
Interest income |
323,429 | 229,464 | 266,800 | |||||||
Interest on past due receivables |
| 757 | 855 | |||||||
| | | | | | | | | | |
Total financial income |
323,429 | 230,221 | 267,655 | |||||||
| | | | | | | | | | |
Financial expenses |
||||||||||
Interest expense |
(1,134,436 | ) | (710,094 | ) | (498,438 | ) | ||||
Capitalized interest |
65,587 | 37,433 | 13,805 | |||||||
Other financial expenses |
(1,597 | ) | (14,467 | ) | (21,408 | ) | ||||
| | | | | | | | | | |
Total financial expenses |
(1,070,446 | ) | (687,128 | ) | (506,041 | ) | ||||
| | | | | | | | | | |
TOTAL |
(747,017 | ) | (456,907 | ) | (238,386 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign exchange difference, net
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Difference generated by assets |
665,723 | 164,162 | 216,481 | |||||||
Difference generated by liabilities |
(2,114,124 | ) | (562,626 | ) | (528,171 | ) | ||||
| | | | | | | | | | |
TOTAL |
(1,448,401 | ) | (398,464 | ) | (311,690 | ) | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The weighted average rates for capitalizing interest in Argentina were 31.7% in 2016, 18.8% in 2015, and 11% in 2014. The weighted average rates in Uruguay were 7.5% in 2016, and 5.5% in 2015 and 2014.
26. Earnings per share
Basic and diluted profit per share is calculated by dividing the Profit/(loss) attributable to equity holders of the Group by the weighted average number of ordinary shares of Molino Cañuelas outstanding during the year.
|
Notes | Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Adjusted average number of ordinary shares outstanding |
31 | 150,000,000 | 150,000,000 | 150,000,000 | |||||||||
Profit per share attributable to equity holders |
5.76 | 0.08 | 0.99 | ||||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
For all periods presented, there were no differences in the weighted-average number of common shares used for basic net earnings per share and there are no financial instruments that could have a dilutive effect. As a result the basic and diluted earnings per share are equal.
The earnings per share have been historically adjusted to reflect the stock split and capital increase detailed in note 31.
F-74
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
27. Disclosure of leases
Finance leases: The Group routinely leases vehicles under various finance leases. The net book value of these assets under finance leases amounts to:
|
Nov 30, 2016 | Nov 30, 2015 | Nov 30, 2014 | Nov 30, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Vehicles |
|||||||||||||
Costfinancial leases |
4,425 | 6,861 | 4,513 | 5,454 | |||||||||
Accumulated depreciation |
(1,975 | ) | (1,301 | ) | (725 | ) | (1,916 | ) | |||||
| | | | | | | | | | | | | |
Net |
2,450 | 5,560 | 3,788 | 3,538 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At the commencement of the lease term, the Group recognizes a lease liability equal to the carrying amount of the leased asset. In subsequent periods, the liability decreases by the amount of lease payments made to the lessors using the effective interest method. The interest component of the lease payments is recognized in the statement of comprehensive income.
Operating leases:
The minimum lease payments expressed in Argentina pesos are the following:
Minimum lease payments
|
Port | Brazil Plant | |||||
---|---|---|---|---|---|---|---|
For 1 year |
13,335 | 21,665 | |||||
For years 2 to 5 |
58,188 | 86,659 | |||||
Beyond 5 years |
219,417 | 14,443 |
F-75
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
28. Consolidated and combined companies
The following table details the Group's consolidated and combined companies and the percent of ownership included in the consolidated combined financial statements of Molino Cañuelas:
|
|
|
|
|
|
% Ownership | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Ref | Country | Local Currency |
Funct Curr |
Year end(*) | Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
Nov 30, 2013 |
||||||||||||||
Alimentos Cañuelas Chile S.P.A. |
Chile | CHP | CHP | Dec 31 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Cañuelas Chile S.P.A. |
Chile | CHP | CHP | Dec 31 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Cañuelas S.A. |
Uruguay | URY | USD | Jul 31 | 0 | % | 0 | % | 100 | % | 100 | % | |||||||||||
Empresa de Alimentos Cañuelas S.R.L. |
Bolivia | BOP | BOP | Jun 31 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Empresa de Servicios MOLCA S.R.L. |
Bolivia | BOP | BOP | Jun 30 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Finexcor S.R.L. |
(a) | Argentina | ARS | ARS | May 31 | 100 | % | 0 | % | 0 | % | 0 | % | ||||||||||
Meats S.R.L. |
(a) | Argentina | ARS | ARS | May 31 | 100 | % | 0 | % | 0 | % | 0 | % | ||||||||||
Megaseed SA |
Argentina | ARS | ARS | Oct 31 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Moinho Canuelas S.A. |
Brazil | BRZ | BRZ | Dec 31 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Molino Americano S.A. |
Uruguay | URY | USD | Nov 30 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Molino Americano S.A. |
Argentina | ARS | ARS | Sep 30 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Molinos Florencia S.A. |
Argentina | ARS | ARS | Nov 30 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Molinos Puntanos S.A. |
Argentina | ARS | ARS | Sep 30 | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||
Molisur S.A. |
(a) | Argentina | ARS | ARS | May 31 | 67 | % | 33 | % | 33 | % | 33 | % | ||||||||||
Southern Multinvest S.R.L. |
(a) | Argentina | ARS | ARS | May 31 | 100 | % | 0 | % | 0 | % | 0 | % |
On November 30, 2015 the Group sold 100% of the shares of Cañuelas S.A. at an equivalent of $3. The transaction resulted in a loss of an equivalent of $41 and is reported in "Other operating income, net".
F-76
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
29. Related-party transactions
The following is a summary of the balances with non-combined related parties as of November 30, 2016, 2015, 2014 and 2013 and transactions for the years ended November 30, 2016, 2015 and 2014:
|
|
|
Transactions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balances | ||||||||||||||||||
|
|
|
Interest (net) |
Other (net) |
|||||||||||||||
At November 30, 2016
|
Receivable | Payable | Sales | Purchases | |||||||||||||||
Shareholders |
35,886 | (213,280 | ) | | | | 281,280 | ||||||||||||
Key management personnel |
|||||||||||||||||||
Directors |
33,190 | (26,516 | ) | | | | | ||||||||||||
Other related parties |
|||||||||||||||||||
Agroyet S.A. |
271 | | | | | | |||||||||||||
Alimentos Cañuelas S.A. |
1,252 | (1,537 | ) | | | | 100,320 | ||||||||||||
Cañuelas S.A. |
9,768 | | | | | | |||||||||||||
Grupo Cañuelas S.A. |
5,249 | | | | | | |||||||||||||
Molca S.A. |
116,000 | (188,135 | ) | (1,638 | ) | 184,878 | | | |||||||||||
Santa Cecilia Oeste S.R.L. |
4 | | | | | | |||||||||||||
VIU S.A. |
| (388 | ) | | | | | ||||||||||||
Zarex S.A. |
| (88 | ) | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
201,620 | (429,944 | ) | (1,638 | ) | 184,878 | | 381,600 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
|
|
Transactions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balances | ||||||||||||||||||
|
|
|
Interest (net) |
Other (net) |
|||||||||||||||
At November 30, 2015
|
Receivable | Payable | Sales | Purchases | |||||||||||||||
Shareholders |
| (6,200 | ) | | | | 18,000 | ||||||||||||
Key management personnel |
|||||||||||||||||||
Directors |
14,093 | (12,663 | ) | | | | | ||||||||||||
Other related parties |
|||||||||||||||||||
Aldo Navilli Hnos. |
| (792 | ) | | | | |||||||||||||
Alimentos Cañuelas S.A. |
| (938 | ) | | | | (3 | ) | |||||||||||
Cañuelas Golf Club S.A. |
| | (12 | ) | | (225 | ) | | |||||||||||
Cañuelas S.A. |
15,629 | | | | | (14,570 | ) | ||||||||||||
Grupo Cañuelas S.A. |
7,984 | | | | | | |||||||||||||
Molisur S.A. |
153 | | | | | | |||||||||||||
Puramel S.A. |
| | | 255 | | | |||||||||||||
Pureza S.A. |
| | (30 | ) | 1,485 | | 3 | ||||||||||||
Santa Cecilia Oeste S.R.L. |
12,346 | | (25 | ) | 8,423 | | | ||||||||||||
Selene S.A. |
5,878 | | | 1,115 | | | |||||||||||||
VIU S.A. |
| | | | | 136 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
56,083 | (19,801 | ) | (859 | ) | 11,278 | (225 | ) | 3,566 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
F-77
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
29. Related-party transactions (Continued)
|
|
|
Transactions | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balances | ||||||||||||||||||
|
|
|
Interest (net) |
Other (net) |
|||||||||||||||
At November 30, 2014
|
Receivable | Payable | Sales | Purchases | |||||||||||||||
Shareholders |
| (4,400 | ) | | | | | ||||||||||||
Key management personnel |
|||||||||||||||||||
Directors |
36,228 | (5,036 | ) | | | | | ||||||||||||
Other related parties |
|||||||||||||||||||
Aldo Navilli Hnos. |
| (1,066 | ) | 41 | | (27 | ) | ||||||||||||
Alimentos Cañuelas S.A. |
5,479 | (12,786 | ) | | | | | ||||||||||||
Cañuelas Golf Club S.A. |
| | (7 | ) | | (465 | ) | | |||||||||||
Cañuelas S.A. |
92 | | | | | | |||||||||||||
Grupo Cañuelas S.A. |
6,310 | | | | | | |||||||||||||
Molisur S.A. |
105 | | | | | | |||||||||||||
Puramel S.A. |
| (4 | ) | | (2 | ) | | 52 | |||||||||||
Pureza S.A. |
| (527 | ) | | 3,493 | | 1 | ||||||||||||
Santa Cecilia Oeste S.R.L. |
3,211 | (240 | ) | (23 | ) | | | 4,311 | |||||||||||
Selene S.A. |
| | | 273 | | | |||||||||||||
VIU S.A. |
| | | 792 | | | |||||||||||||
Zarex S.A. |
| | | | | 507 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
51,425 | (22,993 | ) | (1,096 | ) | 4,597 | (465 | ) | 4,844 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
Balances | ||||||
---|---|---|---|---|---|---|---|
At November 30, 2013
|
Receivable | Payable | |||||
Shareholders |
| (4,400 | ) | ||||
Key management personnel |
|||||||
Directors |
34,254 | (14,872 | ) | ||||
Other related parties |
|||||||
Alimentos Cañuelas S.A. |
3,541 | (9,212 | ) | ||||
Cañuelas Golf Club S.A. |
36,955 | | |||||
Molisur S.A. |
197 | | |||||
Puramel S.A. |
| (7 | ) | ||||
Pureza S.A. |
| (239 | ) | ||||
Santa Cecilia Oeste S.R.L. |
15,608 | (282 | ) | ||||
Selene S.A. |
(1 | ) | | ||||
VIU S.A. |
| (83 | ) | ||||
| | | | | | | |
Total |
90,554 | (29,095 | ) | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-78
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
29. Related-party transactions (Continued)
Key Management compensation: key management includes Directors and first line of management. Compensation to key management personnel for the years ended November 30, 2016, 2015 and 2014 were the following:
|
Nov 30, 2016 |
Nov 30, 2015 |
Nov 30, 2014 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Short term employee benefits |
31,562 | 19,521 | 12,404 | |||||||
Director fees |
122,640 | 11,597 | 33,725 | |||||||
| | | | | | | | | | |
Total compensation |
154,202 | 31,118 | 46,129 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
30. Contracts
30.1. Contractual commitment to acquire property, plant, and equipment:
On December 15, 2015, Molino Cañuelas acquired from Molca S.A. (related party), for a cash payment of $116,000 an irrevocable option to purchase a plot of land located in Zarate, Province of Buenos Aires adjacent to Las Palmas port, with the intention to develop the Industrial Park project. The Industrial Park project is a specially zoned area for purposes of industrial development by the Group and other third parties. The deposit is subject to the Group being listed in any stock market outside Argentina. It is recorded as "Other non-current receivablesrelated".
30.2. Contract manufacturing agreement with Buyatti:
On March 15, 2016 the Group entered into a contract manufacturing agreement with Buyatti S.A.I.C.A. Under this agreement Buyatti will provide a preference of soy bean processing of up to 1,000,000 metric tons per year and related services at their industrial plant located in Puerto San Martín, in the Province of Santa Fé, Argentina. The contract is for a 2 year period starting on April 1, 2016 with an option for renewal until 2022. As part of this agreement the Group paid USD 1.4 ($20 million) upfront, plus ongoing monthly manufacturing fees, and signed an agreement to act as guarantor of debt amounting to USD 3.3 million owed by Buyatti S.A.I.C.A. to Cargill Investments S.R.L and Cargill S.A.C.I. The outstanding balance of guaranteed debt is USD 2.2 million as of November 30, 2016.
30.3. Cargill acquisition
On August 31, 2016 Molino Cañuelas completed the acquisition of certain milling assets from Cargill, Inc. The transaction included the acquisition of seven operating flour mills, related employee base, trademarks, customer base and customer contracts, for a cash payment. In addition Molino Cañuelas acquired 100% of the outstanding shares of Meats S.R.L. and Southern Multinvest S.R.L., and 33% of the outstanding shares of Molisur S.A.
This acquisition offers significant synergies and strategic benefits due to the geographic complementarity of the milling assets acquired with those already owned by the Group.
F-79
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
30. Contracts (Continued)
The fair value of the total consideration transferred on August 31, 2016 was $736,190 for the acquisition of the following major classes of assets and liabilities, at fair value:
|
Fair Value | |||
---|---|---|---|---|
Property, plant and equipment |
2,136,013 | |||
Intangible assets |
106,594 | |||
Inventories |
220,553 | |||
Accounts payable |
(23,419 | ) | ||
Deferred income tax |
(619,224 | ) |
Intangible assets include $65,418 of patents and trademarks, and $41,176 of customer related intangibles. The acquisition of Meats S.R.L., Southern Multinvest S.R.L., and Molisur S.A. has not been assigned a value taking into consideration their dormant status.
As a result of this transaction the Group will record a profit of $1,084,327 after income tax. The main reasons that this acquisition resulted in a profit for the Group were:
The amounts of revenue and profit or loss of this business since August 31, 2016 through November 30, 2016 included in the combined statement of comprehensive income for the period ended November 30, 2016 in the Branded industrial products segment are:
Net sales |
$ | 570 million | ||
Profit from operations before financing and taxation |
$ | 70 million |
The disclosure of revenue and profit or loss as though the acquisition date had been as of the beginning of the annual reporting period is impracticable because the seller is a private entity that is not required to prepare information by segment and has not provided the Company with the data.
Although the Group has submitted all required documentation to the Argentine Antitrust Commission (Comisión Nacional de Defensa de la Competencia), as of the issuance of these financial statements a formal approval is still pending.
31. Subsequent events
31.1. Capitalization and stock split
On February 14, 2017, the Company's shareholder meeting approved:
F-80
Molino Cañuelas S.A.C.I.F.I.A.
Notes to the Consolidated Combined Financial Statements (Continued)
(All amounts in thousands of Argentine pesos, except otherwise indicated)
31. Subsequent events (Continued)
31.2. Restructuring of borrowings
Between December 2016 and February 2017 the Group executed several loan agreements with the objective of improving its capital structure by receiving long-term loans for $3,037 million (denominated in US dollars) and cancelling short term export pre-financing loans for $2,424 million. The Group's main new loans are described below:
Itau UnibancoJP Morgan Chase Bank: on January 31, 2017, the Group obtained USD 70 million credit facilities used for pre-financing of exports with a year grace period and a maturity of 5 years.
HSBC: on December 1, 2016, the Group obtained USD 48 million used for restructuring borrowing with a year grace period and a maturity of 3 years.
Natixis: on December 19, 2016, the Group obtained USD 40 million used for working capital needs with 18 months grace period and a maturity of 4 years.
F-81
Molino Cañuelas S.A.C.I.F.I.A.
Class B Ordinary Shares
(Including in the form of American Depositary Shares)
PROSPECTUS
Joint Global Coordinators |
||
J.P. Morgan |
UBS Investment Bank |
|
Joint bookrunners |
||
HSBC |
Itaú BBA |
, 2017
Until , 2017 (25 days after the commencement of the Global Offering), all dealers that effect transactions in these securities, whether or not participating in the Global Offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Neither the laws of Argentina nor our bylaws or other constitutive documents provide for indemnification of our directors or officers. However, following a decision by our shareholders during our , 2017 shareholders' meeting, we agreed to indemnify our directors and executive officers who are not as well shareholders, for any damages resulting from the performance of their duties as directors or executive officers, as applicable, and other than for damages resulting from gross negligence, fraud, dishonesty, bad faith or willful misconduct by any such director or executive officer, as applicable.
Additionally we maintain directors' and officers' liability insurance covering our directors and executive officers with respect to general civil liability, which he or she may incur in his or her capacity as such.
Finally, pursuant to the international underwriting agreement, the international underwriters will agree to indemnify, under certain conditions, the registrant, its directors and officers and persons who control us (within the meaning of the Securities Act) against certain liabilities under the U.S. securities laws.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES
Date:
|
Sale of Disposition: | Recipient: | ||
---|---|---|---|---|
February 14, 2017 | On February 14, 2017 we conducted an AR$3,000,000 capital increase by means of a capitalization of non-allocated retained earnings. We distributed the resulting 3,000,000 ordinary shares to our principal shareholders in the following proportions: |
Aldo Adriano Navilli (25%) Carlos Adriano Navilli (25%) Ricardo Alberto Navilli (25%) Adriana Elba Villemur (20%) Marcos Aníbal Villemur (5%) |
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. | Description | ||
---|---|---|---|
1.1 | * | Form of Underwriting Agreement between Molino Cañuelas S.A.C.I.F.I.A., the underwriters named therein and the selling shareholders named therein | |
4.1 | * | Form of Deposit Agreement among Molino Cañuelas S.A.C.I.F.I.A., The Bank of New York Mellon, as Depositary, and the holders from time to time of American Depositary Receipts issued thereunder (incorporated by reference to our Registration Statement on Form F-6 (File No. 333- ) filed with the SEC on , 2017). | |
5.1 | * | Form of Opinion of Marval, O'Farrell & Mairal regarding the legality of the shares being registered | |
8.1 | Opinion of Marval, O'Farrell & Mairal regarding tax matters | ||
8.2 | Opinion of Milbank, Tweed, Hadley & McCloy LLP regarding tax matters | ||
10.1 | English translation of Shareholders' Agreement among the members of the Navilli family dated January 18, 2017 |
II-1
Exhibit No. | Description | ||
---|---|---|---|
10.2 | English translation of Four-Party Shareholders' Agreement among the members of the Navilli family dated January 18, 2017 | ||
10.3 | English translation Cargill Acquisition Offer and Purchase Agreement | ||
10.4 | English translation MOLCA Port Lease | ||
10.5 | English translation of Moinho Canuelas plant lease | ||
10.6 | English translation of irrevocable option to purchase MOLCA S.A. Port real estate | ||
10.7 | English translation of Cañuelas Golf S.A. loan agreement | ||
10.8 | Amended and Restated IFC Financing Agreement dated September 29, 2016 | ||
10.9 | * | US$44.3 million loan from Deutsche Bank Aktiengesellschaft dated July 26, 2013 | |
21.1 | Subsidiaries of Molino Cañuelas S.A.C.I.F.I.A. | ||
23.1 | Consent of PwC Argentina | ||
23.2 | Consent of Marval, O'Farrell & Mairal (contained in Exhibits 5.1 and 8.1) | ||
23.3 | Consent of Milbank, Tweed, Hadley & McCloy LLP (contained in Exhibit 8.2) | ||
24.1 | * | Power of Attorney (included on signature page) |
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall he deemed to be the initial bona fide offering thereof.
II-2
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to he signed on its behalf by the undersigned, thereunto duly authorized, in , on the day of , 2017.
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MOLINO CAÑUELAS S.A.C.I.F.I.A. | |||||
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By: |
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Name: | Aldo Adriano Navilli | ||||
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Title: | Chief Executive Officer |
We, the undersigned directors of Molino Cañuelas S.A.C.I.F.I.A., hereby, severally constitute and appoint each of , , and with full powers of substitution our true and lawful attorney, with full powers to sign for us, in our names and in the capacity indicated below, the Registration Statement on Form F-1 filed with the SEC, and any and all amendments to said Registration Statement (including post-effective amendments), and any registration statement filed pursuant to Rule 462(h) under the Securities Act of 1933 in connection with the registration under the Securities Act of 1933 of equity securities of Molino Cañuelas S.A.C.I.F.I.A., and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes he or she might or could do in person, and hereby ratifying and confirming all that said attorney, shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933 this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
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Title
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Date
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Name: Aldo Adriano Navilli |
Chief Executive Officer and President of the Board of Directors | , 2017 | ||
Name: Alejandro Matoso |
Chief Financial Officer |
, 2017 |
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Name: Cristian Cotone |
Chief Accounting Officer |
, 2017 |
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Name: Carlos Adriano Navilli |
Vice President of the Board of Directors |
, 2017 |
Signature
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Title
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Date
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Name: Mariano Navilli |
Director | , 2017 | ||
Name: Daniel Héctor Ercoli |
Director |
, 2017 |
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Name: Ricardo Alberto Navilli |
Director |
, 2017 |
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Name: Ricardo Leandro Navilli |
Director |
, 2017 |
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Name: Adriana Elba Navilli |
Director |
, 2017 |
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Name: Marcos Aníbal Villemur |
Director |
, 2017 |
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Name: Jorge Damián Schnir |
Director |
, 2017 |
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Name: Alejandro German Lemonnier |
Director |
, 2017 |
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the requirements of the Securities Act of 1933, the Registrant's duly authorized representative has signed this registration statement on Form F-1 in Newark, Delaware, on , 2017.
By: | |
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Name: | Donald J. Puglisi | |||||
Title: | Authorized Representative in the United States |
Exhibit 8.1
June 6, 2017
Molino Cañuelas S.A.C.I.F.I.A.
John F. Kennedy 160, B1814BKD
Cañuelas, Province de Buenos Aires,
Argentina
Ladies and Gentlemen:
We have acted as Argentine legal advisers of Molinos Cañuelas S.A.C.I.F.I.A. (the Company), a corporation organized under the laws of the Republic of Argentina (Argentina), in connection with the preparation and filing by the Company with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, of a Registration Statement on Form F-1 (as amended to the date hereof, the Registration Statement).
We confirm that we have reviewed the information in the Registration Statement under the caption Taxation-Material Argentine Tax Considerations. We also confirm to you that, insofar as it relates to Argentine tax law, the discussion set forth in the Registration Statement under the caption Taxation-Material Argentine Tax Considerations, subject to the qualifications, exceptions, assumptions and limitations contained therein, is our opinion.
Our opinion expressed in the Registration Statement under the caption Taxation-Material Argentine Tax Considerations is limited to the federal and provincial laws of Argentina and is based upon existing provisions of federal and provincial laws and regulations, including the Argentine Income Tax Law as of the date hereof, all of which are subject to subsequent, different interpretations and applications with effect from the date of effectiveness of the underlying laws and regulations.
This opinion is limited to the matters expressly stated herein and does not extend to, and is not to be read as extended by implication to, any other matter.
We hereby consent to the filing of this opinion as Exhibit 8.1 to the Registration Statement.
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Very truly yours, |
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MARVAL O FARRELL & MAIRAL |
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/S |
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Juan M. Diehl |
Exhibit 8.2
MILBANK, TWEED, HADLEY & McCLOY LLP
LOS ANGELES 424-386-4000 FAX: 213-629-5063
WASHINGTON, D.C. 202-835-7500 FAX: 202-835-7586
LONDON 44-20-7615-3000 FAX: 44-20-7615-3100
FRANKFURT 49-69-71914-3400 FAX: 49-69-71914-3500
MUNICH 49-89-25559-3600 FAX: 49-89-25559-3700 |
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28 LIBERTY STREET NEW YORK, NY 10005
212-530-5000
FAX: 212-530-5219
June 5, 2017 |
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BEIJING 8610-5969-2700 FAX: 8610-5969-2707
HONG KONG 852-2971-4888 FAX: 852-2840-0792
SEOUL 822-6137-2600 FAX: 822-6137-2626
SINGAPORE 65-6428-2400 FAX: 65-6428-2500
TOKYO 813-5410-2801 FAX: 813-5410-2891
SÃO PAULO 55-11-3927-7700 FAX: 55-11-3927-7777 |
Molino Canuelas S.A.C.I.F.I.A.
John F. Kennedy 160, B1814BKD
Cañuelas, Province of Buenos Aires
Republic of Argentina
Ladies and Gentlemen:
We are acting as United States counsel to Molino Cañuelas S.A.C.I.F.I.A. (the Company) in connection with the preparation of the registration statement on Form F-1 (the Registration Statement) and the related prospectus (the Prospectus) filed with the United States Securities and Exchange Commission. We have examined such matters of fact and law as we have deemed necessary or advisable for the purpose of this opinion.
We hereby confirm our opinion set forth under the caption TaxationMaterial U.S. Federal Income Tax Considerations in the Prospectus.
Because the determination of the Companys status as a passive foreign investment company (a PFIC) for U.S. federal income tax purposes is based on an annual determination that cannot be made until the close of a taxable year, and involves extensive factual investigation (as discussed under TaxationMaterial U.S. Federal Income Tax ConsiderationsPassive Foreign Investment Company Rules), we do not express any opinion herein with respect to the Companys PFIC status in any taxable year.
We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States.
We hereby consent to the use of our name under the captions TaxationMaterial U.S. Federal Income Tax Considerations and Legal Matters in the Prospectus included in the Registration Statement and to the filing, as an exhibit to the Registration Statement, of this letter. In giving this consent we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
AW/ER-L
Exhibit 10.1
MOLINO CAÑUELAS S.A. SHAREHOLDERS AGREEMENT
This Molino Cañuelas S.A. Shareholders Agreement (hereinafter referred to as the Shareholders Agreement) is entered into in the city of Buenos Aires on January 18, 2017, by and between:
1. Mr. ALDO ADRIANO NAVILLI, with Documento Nacional de Identidad (National Identity Document) No. 10,053,805 and registered address at Ombú 3075, city of Buenos Aires (hereinafter referred to as Aldo Navilli) as party of the first part;
2. Mr. RICARDO ALBERTO NAVILLI, with National Identity Document No. 13,429,134 and registered address at Azucena Villaflor 489, piso 4, Rio 1, city of Buenos Aires (hereinafter referred to as Ricardo Navilli) as party of the second part;
3. Mr. CARLOS ADRIANO NAVILLI, with National Identity Document No. 12,657,137 and registered address at Rodríguez Peña 1560, piso 3°, city of Buenos Aires (hereinafter referred to as Carlos Navilli) as party of the third part; and
4. Ms. ADRIANA ELBA NAVILLI, with National Identity Document No. 11,398,465 and registered address at Las Heras 41, Laboulaye, Province of Córdoba (hereinafter referred to as Adriana Navilli) and Mr. MARCOS ANÍBAL VILLEMUR, with National Identity Document No. 26,927,403, with registered address at Las Heras 41, Laboulaye, Province of Córdoba (hereinafter referred to as Marcos Villemur) as party of the fourth part.
In this Shareholders Agreement, Aldo Navilli, Ricardo Navilli and Carlos Navilli shall each be referred to as a Party. In addition, Adriana Navilli and Marcos Villemur, shall be jointly referred to as a single Party.
W H E R E A S
A. The parties are, jointly, exclusive and lawful holders of 12,000,000 common shares of a nominal value of one peso ($1) each and with one (1) vote per share representing one hundred percent (100%) of the capital stock and voting rights of Molino Cañuelas S.A., a corporation organized and in good standing under the laws of the Argentine Republic (hereinafter referred to as Molino Cañuelas or the Corporation), pursuant to the details provided in Annex I hereto (hereinafter and jointly, the Initial Shares).
B. The Parties are parties to and associated by a shareholders agreement dated March 19, 2004 (in addition to its amendments dated March 19, 2004, April 28, 2009 and April 13, 2016, hereinafter referred to as the 2004 Shareholders Agreement).
C. The Parties have agreed that the Corporation shall make a public offering and shall publicly trade its shares in local and foreign stock markets and exchanges at the appropriate time under suitable conditions, which may be determined by Aldo Navilli, for which purpose the Parties shall trade the Initial Shares that are not to be offered in a secondary offering in such stock markets and exchanges for common Class A shares of the Corporation, with the right to five (5) votes per share (the Common Class A Shares).
D. The Parties intend to reach an agreement on certain matters related to the management and governance of the Corporation, as well as the possible transfer of their shares for its application during the life of this Shareholders Agreement.
Now, therefore, the Parties hereby agree to the following:
SECTION I
DEFINITIONS AND INTERPRETATION
Clause 1.01. Defined Terms
In this Shareholders Agreement, all the defined terms, of which the first letter of each word is capitalized and which are placed between quotations marks and underlined on initially defining their meaning (except if they are words at the beginning of a sentence or proper nouns and if so required by the context) shall have the meaning assigned to them in each case in the text of the Shareholders Agreement and in this clause. For reference purposes, a list of the defined terms (which may not include all of the terms defined in this Shareholders Agreement) has been added to this clause, in which such definitions are indicated and, as the case may be, clarification is provided with regard to the scope of each respective defined term:
Shares: shall mean (i) Initial Shares; (ii) Class A Shares; (iii) any other shares of the Corporation (other than the Initial Shares and the Class A shares); (iv) any other right issued by the Corporation that may be subscribed and/or acquired by any of the Parties and may - even if subject to a condition, conversion or procedure of a similar nature - become Shares; (v) any revocable or irrevocable contribution made or to be made to the Company by any of its shareholders or by third parties; and (vi) any right, prerogative or power incorporated into, added to, associated with or attached to the Shares.
Initial Shares: has the meaning assigned in the whereas clause of this Shareholders Agreement.
Class A Shares: has the meaning assigned in the whereas clause of this Shareholders Agreement.
Offered Shares: has the meaning assigned in subsection (a) of Clause 5.02 hereof.
Purchasing Shareholders: has the meaning assigned in subsection (a) of Clause 5.04 hereof.
Non-Selling Shareholders: has the meaning assigned in Clause 5.01 hereof.
Selling Shareholder: has the meaning assigned in Clause 5.01 hereof.
Shareholders Agreement: has the meaning assigned in the first introductory paragraph hereof and includes each and every one of the amendments, addenda and supplementary documents hereto that may be issued by the Parties pursuant to this document.
2004 Shareholders Agreement: has the meaning assigned in the whereas clause of this Shareholders Agreement.
Adriana Navilli: has the meaning assigned in the header of this Shareholders Agreement.
Aldo Navilli: has the meaning assigned in the header of this Shareholders Agreement.
Carlos Navilli: has the meaning assigned in the header of this Shareholders Agreement.
Corporation: has the meaning assigned in the whereas clause of this Shareholders Agreement and includes all of the Corporations associated, affiliated and/or controlled corporations and/or companies.
Preemptive Right: has the meaning assigned in subsection (a) of Clause 5.04 hereof.
Independent Directors: has the meaning assigned in Clause 3.02 (b) hereof.
Board of Directors: has the meaning assigned in Clause 5.01 hereof.
Encumbrance: has the meaning assigned in Clause 4.06 hereof.
Notice of Purchase: has the meaning assigned in subsection (a) of Clause 5.05.
Notice of Sale: has the meaning assigned in Clause 5.01 hereof.
Marcos Villemur: has the meaning assigned in the header of this Shareholders Agreement.
Parties: has the meaning assigned to it in the introductory paragraph hereof.
Exercise Period: has the meaning assigned to it in subsection (a) of Clause 5.03 hereof.
Price: has the meaning assigned to it in Clause 5.02 hereof.
Ricardo Navilli: has the meaning assigned to it in the header of this Shareholders Agreement.
Transfer: has the meaning assigned to it in Clause 4.01 hereof.
Clause 1.02. Interpretations.
Unless otherwise indicated or required by the context, in this Shareholders Agreement or in relation to this Shareholders Agreement:
(i) the titles of the Sections, Clauses and/or other sections of the Shareholders Agreement are included only for better reference and shall be ignored for the purposes of their interpretation;
(ii) if so required by the context, the words and terms defined in singular form include the plural form and vice versa, and the words and terms defined in feminine gender form include the feminine, masculine and neutral gender forms;
(iii) unless otherwise indicated, all references to Annexes are references to Annexes of this Shareholders Agreement (each of which is considered an integral part of this Shareholders Agreement);
(iv) all references to Articles, Sections or Clauses, unless otherwise expressly indicated, are references to the Articles, Sections or Clauses of this Shareholders Agreement;
(v) the expressions herein, hereunder, and other similar expressions used in this Shareholders Agreement refer to this Shareholders Agreement in its entirety, but not to a particular provision contained in it, unless otherwise expressly indicated;
(vi) the expression including or comprising and other similar expressions used herein shall mean including but not limited to;
(vii) references to any person (including any Party) shall include the permitted successors (successors and/or assigns, either inter vivos and/or mortis causae, voluntary and necessary or legal), successors-in-interest, acquirers, beneficiaries, heirs, legatees and assignees of such person;
(viii) any accounting term and/or expression included herein that has not been defined herein or to which an express meaning has not been attributed shall have the meaning assigned to such term or expression by the generally accepted accounting principles of the Argentine Republic; and
(ix) the whereas clause hereof may be used for the purposes of determining the intention of the Parties on executing the Shareholders Agreement.
SECTION II
PURPOSE OF THE AGREEMENT. RULES APPLICABLE TO MANAGEMENT AND GOVERNANCE
OF THE CORPORATION
Clause 2.01. Purpose.
(a) It is the common and irrevocable intent of all the Parties that the governance, management, auditing, policy making and administration of the Corporation, its assets, activities and operation shall be conducted pursuant to the rules established in Section III of this Shareholders Agreement.
(b) The Parties hereby undertake to:
(i) perform or refrain from performing, as the case may be, all necessary and/or convenient acts for the implementation and fulfillment of (1) the common and irrevocable intent stated in the initial paragraph of this Clause 2.01, as well as the provision established in Clause 2.02 hereof, and (2) the purpose of this Shareholders Agreement and each and every one of the provisions of this Shareholders Agreement; and
(ii) have the persons designated by them to act or hold any position in the Corporation or any of its bodies (including its shareholders meeting, board of directors, body of statutory auditors, management or any committee) perform or refrain from performing, as the case may be, all acts necessary and/or convenient for the implementation and fulfillment of (1) the common
and irrevocable intent stated in the initial paragraph of this Clause 2.01 hereof, as well as the provisions established in Clause 2.02 hereof and (2) the purpose of this Shareholders Agreement and each and every one of the provisions of this Shareholders Agreement. Any act or omission by any of the persons holding such positions and/or performing such functions that is inconsistent with the provisions of this Shareholders Agreement shall be deemed to constitute non-compliance by the Party or Parties who proposed such person for designation or nomination, for all purposes of this Shareholders Agreement.
Clause 2.02. Corporate Management and Governance.
(a) Notwithstanding the powers assigned by laws, regulations and/or corporate by-laws (or regulations) to Corporate bodies and authorities, it is hereby expressly established that no decision of any nature may be adopted at any level of the Company in opposition to the provisions established in Clause 2.01 of this Shareholders Agreement. Any decision adopted or omitted by Corporate bodies, officials, authorities and/or employees that contradicts, in any way, the provisions hereof, shall be null and void and the Party or Parties who directly or indirectly allowed, caused or facilitated (either by action or omission) the occurrence or adoption of such decision, action or omission, including by having proposed the designation of any Corporate body, official and/or authority, shall be deemed directly and jointly liable for non-compliance with this Shareholders Agreement.
(b) The Parties hereby accept and provide the broadest support for the request, admissibility and adoption of any court or administrative measure or order (including precautionary or preventive measures or other kinds of measures) that in the most immediate and expeditious way, ex-parte, without any injunction bond of any kind, proceeds to prevent and/or render null and void any decision adopted or omitted or any action performed by any Party and/or Corporate bodies, officials, authorities and/or employees that contradicts, in any way, the provisions of this Shareholders Agreement. The Parties hereby state that they shall not, in any way, oppose, by any means or method, the request, issue, adoption, application and/or implementation of any of such measures or orders.
Clause 2.03. Chairmanship.
During the first five years following the effective date of this Agreement, the Board of Directors of the Corporation shall be chaired by Mr. Aldo Adriano Navilli or by the person chosen by Mr. Aldo Adriano Navilli for such purpose, at his sole discretion. As of the sixth
year following the effective date of this Agreement, the chairman of the Board of Directors of the Corporation shall be elected pursuant to the rules established in Section III of this Shareholders Agreement. Mr. Aldo Adriano Navilli may freely and voluntarily resign, at any time, as Chairman of the Board of Directors, without this requiring prior notice or any formalities of any kind.
SECTION III
GENERAL RULES APPLICABLE TO THE CORPORATIONS BOARD OF DIRECTORS AND
SHAREHOLDERS MEETINGS.
Clause 3.01. General Obligations.
(a) Notwithstanding any provision contained in the Corporate by-laws (or regulations), the Parties hereby undertake to ensure that the persons designated each time at their proposal to hold the position of directors of the Corporation conduct all acts required to comply with each and every one of the provisions of this Shareholders Agreement. Any act or omission by any of the persons holding the abovementioned positions that is inconsistent with the provisions of this Shareholders Agreement, shall be deemed, for all purposes of this Shareholders Agreement, an act or omission by the Party or Parties at whose proposal such person was designated.
(b) Prior to any Corporate Board of Directors Meeting or Regular or Special Shareholders Meeting, the Parties shall meet and adopt sufficiently in advance all the measures that are necessary and convenient to give full effect to the provisions of this Shareholders Agreement and ensure that no decision is adopted by any corporate body (including the Board of Directors or Shareholders Meeting) in violation of the provisions established in this Shareholders Agreement. Notwithstanding any provision to the contrary, all decisions related to the governance, administration and auditing of the Corporation (including its activities, business and assets) shall be made by the favorable resolution of at least three (3) Parties to this Shareholders Agreement. It is hereby expressly established that during the first five (5) years of the life of this Shareholders Agreement, one of such Parties must necessarily be Aldo Navilli. Once the respective decision has thus been made, all of the Parties (even the one opposed to the adoption of such decision, if any) shall act in a joint and unified manner (as a single party or person) to enforce the decision adopted, including in all of the Corporate bodies; particularly in its Shareholders Meetings (Regular and Special) by voting with all their Shares and in the Board of Directors Meetings, by voting in favor of such decision and ensuring that it is approved. Once a decision has been adopted by the Parties under the terms
established in this clause, no Party shall display or allow the display of dissent in the corporate bodies.
Clause 3.02. Board of Directors.
The following rules shall apply during the life of this Shareholders Agreement:
(a) The Corporations management shall be conducted by the Board of Directors, composed of eleven (11) regular members and an equal number of alternate members, of which each Party is entitled to the designation, at their indication, of two (2) regular directors and an equal number of alternate directors, resulting in the appointment in this manner of eight (8) of such members. In the event of absence or impediment, the alternate directors designated at the indication of each Party shall replace the regular directors designated at the indication of the same Party in the manner or order indicated by such Party and such method of replacement shall be recorded in the Shareholders Meeting at which they are designated.
(b) Each Party shall be entitled to remove or replace (at their sole discretion), at any time, any of the directors designated at their indication, as established in § (a) of this Clause 3.02. In all cases, however, such Party shall hold the Corporation and the other Parties harmless from and against any claims that may be made by a director replaced in such a manner.
(c) In addition to the eight (8) regular directors (and the respective alternate directors) designated as stated in § (a) of this Clause 3.02, another three (3) regular directors, and an equal number of alternate directors, shall be members of the Board of Directors. Such directors shall be independent, as established in Law No. 26,831 on the Capital Market and the Regulations of the National Securities Commission (hereinafter, the Independent Directors). The Independent Directors shall be designated from a list jointly proposed by at least three (3) Parties, one of which must be Aldo Navilli during the first five (5) years of the life of this Shareholders Agreement.
(d) In the event that, due to the application of regulations in effect, at any time, shareholders of the Corporation who are not Parties to this Shareholders Agreement are entitled to designate and effectively designate one or more members of the Corporations Board of Directors, the Parties shall increase the number of eleven (11) regular (and alternate) members of the Board of Directors by the number of positions required so that the director/s designated at the proposal of the abovementioned shareholders who are not Parties to this Agreement may be included in the administrative body, for as long as this is the case.
(e) The directors shall hold office for at least one (1) and no more than three (3) fiscal years and may be successively reelected, as resolved by the Shareholders Meeting. The Chairman of the Board of Directors shall cast the deciding vote in the event of a tie.
(f) Having complied with the provisions of Clause 3.01 (b), the Board of Directors shall meet at least every three (3) months. Meeting notices must be duly sent to the Directors by fax, with a written acknowledgment of receipt and/or by e-mail, at the telephone numbers and at the addresses recorded for such purpose at the Corporation, at least seven (7) calendar days in advance, with the proposed meeting agenda. During the following five (5) calendar days, the directors may request that the chairman of the Board of Directors include additional items in the proposed meeting agenda. The chairman must inform the directors of the final agenda at least two (2) days in advance of the Board of Directors meeting. Prior to any Board of Directors meeting, the Parties shall meet and adopt, sufficiently in advance, all of the measures that are necessary and convenient to give full effect to the provisions of Section III and ensure that no decision is adopted in violation of the provisions of such Section III and those established in this Shareholders Agreement.
(g) The Board of Directors shall validly meet with the attendance, in person or duly represented, of at least more than half of the number of directors, which during the first five (5) years of the life of this Shareholders Agreement, must include at least one (1) of the directors designated at the proposal of Aldo Navilli. Except as indicated in § (h) with regard to Relevant Matters, during the first five (5) years of the life of this Shareholders Agreement, the Board of Directors shall issue resolutions by the affirmative vote of the majority of the directors present, provided that the affirmative votes include (i) the affirmative vote of at least one (1) director designated at the proposal of Aldo Navilli; (ii) the affirmative vote of at least one (1) director designated at the proposal of any of the other three (3) Parties to this Shareholders Agreement; and (iii) the affirmative vote of at least one (1) director designated at the proposal of the other two (2) Parties to this Shareholders Agreement who are not the Parties referred to in subsections (i) and (ii) of this § (g). Except as indicated in § (h) with regard to Relevant Matters, once the first five (5) years of the life of this Shareholders Agreement have elapsed, the Board of Directors shall issue resolutions by the affirmative vote of the majority of the directors present, provided that the affirmative votes include those of the directors designated by at least three (3) of the Parties, whichever they may be, to this Shareholders Agreement. Notwithstanding any provision to the contrary in the corporate by-laws, no decision may be adopted by the Board of Directors without the affirmative votes indicated in this clause.
(h) For the discussion of any Relevant Matter, the Board of Directors shall only meet validly with the attendance, in person or duly represented, of at least half of the number of directors, and shall issue resolutions by the affirmative vote of the majority of the votes present, provided that the affirmative votes include at least one (1) director designated at the proposal of each of the four (4) Parties to this Shareholders Agreement. Notwithstanding any provision to the contrary in the corporate by-laws, no decision may be adopted by the Board of Directors without the affirmative votes indicated in this clause.
Clause 3.03. Shareholders Meetings.
Having complied with the provisions established in Clause 3.01 (b), the Corporate Shareholders Meetings shall be governed as follows:
(a) Regular Shareholders Meeting:
(i) Quorum: Established upon first notice with the presence of the majority of the Corporations shares with the right to vote and upon second notice with the presence of any number of Corporate shares, in both cases provided that at least three (3) of the Parties to this Shareholders Agreement are present, one (1) of which must necessarily be Aldo Navilli during the first five (5) years of the life of this Shareholders Meeting.
(ii) Decisions: Decisions are adopted by the affirmative vote of at least three (3) of the Parties to this Shareholders Agreement, one (1) of which must necessarily be Aldo Navilli during the first five (5) years of the life of this Shareholders Agreement.
Notwithstanding any provision to the contrary in the Corporate by-laws, no decision may be adopted by the regular Shareholders Meeting without the affirmative votes indicated in this clause.
(b) Special Shareholders Meeting.
(i) Quorum: Established both upon first and second notice with the presence of shareholders representing sixty percent (60%) of the total votes of the Corporation, in both cases provided that at least three (3) of the Parties to this Shareholders Agreement are present, one (1) of which must necessarily be Aldo Navilli during the first five (5) years of the life of this Shareholders Agreement.
(ii) Decisions: Decisions are adopted by the affirmative vote of at least three (3) of the Parties to this Shareholders Agreement, one (1) of which must necessarily be Aldo Navilli during the first five (5) years of the life of this Shareholders Agreement.
Notwithstanding any provision to the contrary in the Corporate by-laws, no decision may be adopted by the regular Shareholders Meeting without the affirmative votes indicated in this clause.
(c) Shareholders Meetings Discussing Relevant Matters.
(i) Quorum: The four (4) Parties to this Shareholders Agreement must be present in the Shareholders Meetings discussing Relevant Matters, both upon first and second notice.
(ii) Decisions: Decisions on Relevant Matters shall be adopted by the affirmative vote of the four (4) Parties to this Shareholders Agreement.
Notwithstanding any provision to the contrary in the Corporate by-laws, no decision may be adopted by the regular Shareholders Meeting without the affirmative votes indicated in this clause.
(d) General Rule for all Shareholders Meetings.
Notwithstanding the rules listed above and in spite of the provisions of the Corporate by-laws, the Parties shall, under their responsibility, perform all the actions or omissions necessary or convenient so that no decision of the Corporation may be made, adopted and/or approved in violation of the provisions of this Clause 3.03. Non-compliance with this obligations shall be considered serious non-compliance with this Shareholders Agreement.
Clause 3.04. Relevant Matters.
(a) Any and all decisions that must be adopted by the Company (whether they need to be approved by the Board of Directors, the Shareholders Meeting and/or any other corporate body) in relation to the matters, subjects and topics listed below (the Relevant Matters) may only be validly accepted and performed by the Corporation if previously approved by the favorable vote of all the Parties to this Shareholders Agreement.
(b) The Relevant Matters are the following:
1. Dissolution, voluntary liquidation or bankruptcy of the Corporation.
2. Transfer of the Corporations goodwill and/or the disposal of all or substantially all of the Corporations assets.
SECTION IV
TRANSFER OF THE CORPORATIONS SHARES
Clause 4.01. Limitation to the Transfer of the Corporations Shares.
During the life of this Shareholders Agreement, none of the Parties may sell or offer to sell, grant purchase options, transfer or assign for any reason or in any way, pledge, guarantee, grant the right to use or in any way dispose of, for any reason, including transfers for payment in kind, exchange and/or donation (any of these actions referred to as a Transfer) of the Corporations Shares owned by them, if such Transfer is not allowed by the provisions of this Shareholders Agreement and performed in accordance with them. The Parties shall not allow the Corporation, nor may the Corporation register or allow the registration of any Transfer of Shares that is not allowed or performed pursuant to the terms of this Shareholders Agreement.
Clause 4.02. Permitted Transfer of Shares.
The Parties may only Transfer their Shares if:
(a) the Transfer is performed for valuable consideration, for a price in money (with the exception of Transfers (i) under Clause 4.03 hereof, or (ii) to a Controlled Company performed as established in Clause 4.03 hereof, in either of which cases this requirement shall not apply; or (iii) under Clause 4.05 hereof); and
(b) Transfers include, in each case, Shares with all their rights, whether property rights or others (including voting rights, preemptive rights and the right to a proportional increase of the unclaimed portion of an estate, which may not be transferred separately from the respective Shares); and
(c) the procedures established in Section V hereof which governs Preemptive Rights (as defined below) have been performed, except in the case of a Transfer (i) under Clause 4.03 hereof, or (ii) to a Controlled Company, performed as established under Clause 4.04 hereof, in any of which cases the procedure established in Section V hereof shall not apply; or (iii) under Clause 4.05 hereof.
Clause 4.03. Transfer of Shares within a Family Branch.
(a) Ricardo Navilli may freely Transfer, on one or more occasions, Shares to Alfredo Navilli, Ricardo Leandro Navilli, Francisco Andrés Navilli and Vicente Navilli and any of their respective heirs, under the condition that, simultaneously with such Transfer, the acquirers of the Shares are incorporated into this Shareholders Agreement, paying in the Part corresponding to Ricardo Navilli (jointly assuming the rights and obligations related to such Part). The transferor shall be jointly responsible with the acquirer for compliance with all of the obligations of the latter under this Shareholders Agreement. In addition, the persons mentioned above, holders of Shares and having paid in Ricardo Navillis Part, may freely Transfer Corporate Shares, only among themselves, on one or more occasions.
(b) Carlos Navilli may freely Transfer, on one or more occasions, Shares to Enzo Agustín Navilli, Nicolás Adriano Navilli and María Florencia Navilli and/or any of their respective heirs, under the condition that, simultaneously with such Transfer, the acquirers of the Shares are incorporated into this Shareholders Agreement, paying in the Part corresponding to Carlos Navilli (jointly assuming the rights and obligations related to such Part). The transferor shall be jointly responsible with the acquirer for compliance with all of the obligations of the latter under this Shareholders Agreement. In addition, the abovementioned persons, holders of Shares and having paid in Carlos Navillis Part, may freely Transfer Corporate Shares, only among themselves, on one or more occasions.
(c) Aldo Navilli may freely Transfer Shares, on one or more occasions, to Regina Navilli and/or Luciano Navilli and/or Mariano Navilli and/or any of their respective heirs, under the condition that, simultaneously with such Transfer, the acquirer/s of the Shares are incorporated into this Shareholders Agreement, paying in the Part corresponding to Aldo Navilli (thus jointly assuming the rights and obligations related to such Part). The transferor shall be jointly responsible with the acquirer for compliance with all the obligations of the latter under this Shareholders Agreement. In addition, the abovementioned persons, holders of Shares and having paid in Aldo Navillis Part, may freely Transfer Corporate Shares, only among themselves, on one or more occasions.
(d) Adriana Navilli and Marcos Villemur may freely Transfer, on one or more occasions, Shares to Tomás Villemur and Emma Villemur and/or any of their respective heirs, under the condition that, simultaneously with each Transfer, the acquirer/s of the Shares are incorporated into this Shareholders Agreement, paying in the Part corresponding to Adriana Navilli and Marcos Villemur (jointly assuming the rights and obligations related to such Part). The transferor shall be jointly
responsible with the acquirer for compliance with all the obligations of the latter under this Shareholders Agreement. In addition, the abovementioned persons, holders of Shares and having paid in Aldo Navillis Part, may freely transfer Corporate Shares, only among them, on one or more occasions.
Clause 4.04. Transfer to a Controlled Company.
(a) Share Transfers by the Parties to controlled companies with respect to which the transferor possesses the full and unrestricted ownership of no less than ninety-nine percent (99%) of the capital stock and shares or units of ownership interest with the right to vote, without calculating the plurality of votes, shall not be subject to Preemptive Rights (or to the restrictions and procedures indicated in Section V hereof).
(b) Any Party wishing to Transfer Shares to a controlled company must previously show in a manner that is satisfactory to the rest of the Parties, that the acquirer has the previously mentioned capacity in relation to the transferor. For such purpose, it must notify the rest of the Parties of its intention to perform the Transfer fifteen (15) calendar days in advance of the date proposed for it, providing the documents proving that the acquiring controlled company has such conditions in relation to the transferor and that it shall preserve such conditions in the Transfer. Within the same term, the acquiring controlling company must express its unconditional will to submit to this Shareholders Agreement.
(c) Notwithstanding all of the above or any Transfer performed in accordance with the system authorized by this Clause, (i) the transferring Party shall continue to be jointly obligated by the provisions of this Shareholders Agreement with the acquiring controlled company; (ii) all of the rights and obligations of the transferring Party arising from this Shareholders Agreement must be assigned and transferred to such controlled company on performing the Transfer, fully in the event of a full Transfer, or in proportion to the Shares included in the Transfer, if it is Partial; and (iii) any Transfer of Shares performed under the system established in this Clause shall be subject to the condition subsequent of the maintenance by the acquiring controlled company, with regard to the Party performing the Transfer, of its controlled condition that allowed it to perform the Transfer.
Clause 4.05. Free Transfer.
Once the Corporation is incorporated into the system of public offering and trading of its shares, the Transfer at any time and in one or more operations of up to 20% of the total Class A Shares held by each Party at the time of the initial public offering (IPO) of the Corporations shares shall not be subject to Preemptive Rights (or subject to the restrictions
and procedures mentioned in Section V hereof). Any Transfer of Class A Shares under the terms of this Clause 4.05 must previously undergo the conversion into Corporate shares with the right to one (1) vote per Share under the terms established in the corporate by-laws in the terms set forth in Clause 5.08(b) of this Shareholders Agreement.
Clause 4.06. Encumbrances on Corporate Shares.
(a) None of the Parties may perform, constitute or allow the constitution or existence, in any way, of a fiduciary transfer, usufruct, pledge, assignment as security, attachment or other encumbrance on the Shares of their property, or an irrevocable mandate in favor of another person to exercise any of such rights, except with the express written authorization of the other Parties (any of these cases shall be referred to as an Encumbrance).
(b) Should one of the Parties have an Encumbrance imposed on the Shares of its property, consisting of a precautionary or preventive measure (whether an attachment or other), such Party hereby undertakes (i) to replace the Shares on which the Encumbrance was imposed with another or other properties that are acceptable to the Court imposing the Encumbrance (if possible according to the nature and characteristics of the measure implemented and (ii) if it is not possible to comply with the provisions of subsection (i) above, the Party holding the Shares on which the Encumbrance was imposed shall have a term of one hundred and twenty (120) court working days as of the notice of such Encumbrance to have it lifted or substituted, unless the imminence of the foreclosure of the Encumbrance, or agreements of the Corporation with third parties expressly approved by the Parties impose shorter terms than the one mentioned above, in which case the Party holding the Shares on which the Encumbrance was imposed shall have the Encumbrance lifted or replaced prior to the foreclosure of the Corporate Shares affected by the Encumbrance or within the term established in the respective agreements of the Corporation with third parties.
SECTION V
PREEMPTIVE RIGHT
Clause 5.01. Notice of Intention to Transfer Shares.
If one of the Parties wishes to perform a total or partial Transfer of the Corporate Shares owned by it (that Party shall hereinafter be referred to as the Selling Shareholder) to any third party, including any Party -and provided that it is not one of the cases authorized under Clauses 4.03 or 4.04- such Selling Shareholder must report its decision in writing
(hereinafter referred to as the Notice of Sale) to the Corporations Board of Directors (the Board of Directors) and the remaining Parties (hereinafter referred to as the Non-Selling Shareholders).
Clause 5.02. Content of Notice of Sale.
The Notice of Sale must be sent simultaneously to the Board of Directors and Non-Selling Shareholders, establishing in writing: (i) the number and details of the Shares belonging to the Selling Shareholder that it wishes to Transfer (hereinafter referred to as the Offered Shares); and (ii) the price in money and cash for each Corporate Share for which the Selling Shareholder is willing to perform the Transfer of the Offered Shares (hereinafter referred to as the Price).
Clause 5.03. Offer of Sale.
(a) The Notice of Sale shall be considered, for all purposes, an irrevocable offer of sale of the Offered Shares made by the Selling Shareholder to the Non-Selling Shareholders for a term of thirty (30) calendar days (hereinafter referred to as the Exercise Period).
(b) Once the Notice of Sale has been provided, the Board of Directors shall immediately proceed to verify that all of the Non-Selling Shareholders have received it; otherwise, it shall notify them immediately.
(c) The Exercise Period shall be the same for all Non-Selling Shareholders and shall be calculated as of the receipt by the Board of Directors of the Notice of Sale, regardless of the date on which each Non-Selling Shareholder has received the Notice of Sale. The offer of sale issued by the Selling Shareholder shall be understood to be made at the Price.
Clause 5.04. Preemptive Right.
(a) Non-Selling Shareholders shall have preemptive rights to purchase all, but no less than all, of the Offered Shares (hereinafter referred to as the Preemptive Right). If all of the Non-Selling Shareholders decide to exercise their respective Preemptive Rights (hereinafter referred to as the Purchasing Shareholders), the Offered Shares shall be distributed in proportion to their respective Corporate Shareholdings, excluding from the respective distribution the proportion corresponding to any of the Parties who are not Purchasing Shareholders. For clarification purposes, it is hereby stated that in this case, the provisions of Clause 5.08 (b) hereof shall not apply.
(b) Should one of the Non-Selling Shareholders decide to exercise their respective Preemptive Rights, the Offered Shares shall be distributed proportionally to their respective Corporate Shareholdings, excluding from the distribution the proportion corresponding to any of the Parties who are not Purchasing Shareholders. For clarification purposes, it is hereby stated that in this case, the provisions of Clause 5.08 (b) hereof shall not apply.
(c) In all cases, the exercise of Preemptive Rights shall entail for the Purchasing Shareholder the obligation to purchase all of the Offered Shares and, therefore, the Offered Shares shall be understood to be jointly purchased by all of the Purchasing Shareholders, who shall jointly assume the obligation of payment of the Price.
Clause 5.05. Notice of Purchase.
(a) The Non-Selling Shareholders must, within the Exercise Period, notify the Board of Directors in writing if they intend to exercise their Preemptive Rights with regard to the Offered Shares (such notice to the Board of Directors shall hereinafter be referred to as the Notice of Purchase).
(b) The Notice of Purchase shall entail, for the Purchasing Shareholder, full acceptance of the sale offer (for the Price) of the Offered Shares, made by the Selling Shareholder through the Notice of Sale.
(c) Acceptance of the sale offer of the Shares Sold for the Price shall be understood to be performed as of the written notification of the Board of Directors, of the Notice of Purchase. Failure to provide a written Notice of Purchase to the Board of Directors within the Exercise Period shall imply - with no admission of proof to the contrary - the waiver by the Non-Selling Shareholders of their Preemptive Rights established herein.
Clause 5.06. Terms and Conditions of the Purchase and Sale of Offered Shares.
(a) The Notice of Purchase as established in Clause 5.05 above shall entail the execution of an Agreement for the Purchase and Sale of the Offered Shares, for the Price, by and between the Selling Shareholder, as party of the first part, and the Purchasing Shareholder/s, as party of the second part.
(b) Unless otherwise agreed in writing by the Selling Shareholder and each of the Purchasing Shareholders, the Agreement for the Purchase and Sale of the Offered Shares shall be executed under the following terms:
(i) Purpose: the Offered Shares;
(ii) Price: The amount established as such in the Notice of Sale;
(iii) Method of Payment of the Price: on the due date, either in cash or by transfer to the bank account indicated by the Selling Shareholder five (5) business days prior to the date of completion;
(iv) Transfer and Delivery of Offered Shares: On the due date, the Selling Shareholder must provide to the Purchasing Shareholder, upon payment of the Price: (1) the certificates representing the Offered Shares, free from any restriction or encumbrance (with the exception of any restriction or encumbrance that may have been established on the Corporate Shares admitted by this Shareholders Agreement); and (2) the notice sent to the Corporation reporting (for the purposes established in Section 215 of Law 19,550) the transfer of the Offered Shares to the Purchasing Shareholder.
(v) Place, Date and Time of Completion: Unless otherwise expressly agreed by the Selling Shareholder and the Purchasing Shareholder, the completion of the Agreement for the Purchase and Sale of the Offered Shares, understood as the fulfillment of all the obligations of the Selling Shareholder and the Purchasing Shareholder, must take place within (10) calendar days following the determination of the Price, at the office of a banking institution of the city of Buenos Aires and within banking hours allowing the payment of the Price as stated above. In the event of a discrepancy or lack of agreement, completion shall take place at the registered legal address of the Corporation on the date and at the time determined by the Board of Directors.
Clause 5.07. Non-Compliance with the Agreement for the Purchase and Sale of the Offered Shares.
(a) Default in the fulfillment of the obligations of the parties to the agreement for the purchase and sale of the Offered Shares shall occur by operation of law upon expiration of the agreed terms, without prior notice of any kind. Once default by one of the parties has occurred, the complying party may choose to: (i) demand compliance with the specific obligation, plus a fine for each day of delay in compliance with the obligation, equal to 0.5% (five tenths of one percent) of the Price; or (ii) immediately declare the termination the agreement for the purchase and sale of the Offered Shares for reasons attributable to the non-complying party.
(b) Should the complying party choose to demand compliance as indicated in § (a) (i) above, if the non-complying party is the Selling Shareholder, the fine accrued until the date of compliance with its obligation shall be deducted from the Price; if the non-complying party is the Purchasing Shareholder, the fine accrued until compliance with the obligation shall be added to the Price and must be paid in addition to it.
(c) Should the complying party choose to declare the agreement for the purchase and sale of the Offered Shares terminated, the complying party shall be entitled to claim from the non-complying party, payment - within five (5) calendar days as of the date on which notice is provided of such decision - of an amount equal to thirty percent (30%) of the Price, by way of compensation and penalty.
Clause 5.08. Failure to Exercise Preemptive Rights.
(a) If the Board of Directors does not receive - within the Exercise Period - any Notice of Purchase sent by any of the Non-Selling Shareholders, the Selling Shareholder shall be free to Transfer the Offered Shares to any interested third party at the Price, provided that such transfer is performed in terms substantially analogous to the ones established in the Notice of Sale. Should a Transfer be intended during the first five (5) years of the life of this Shareholders Agreement, the intended acquirer must previously and expressly agree, without any reservations, to submit to all of the provisions contained in Section II of this Shareholders Agreement and the transferring Party shall be jointly liable for any non-compliance by the acquiring party with its obligations under the abovementioned Section II of this Shareholders Agreement.
(b) In no case and under no circumstances shall a Selling Shareholder Transfer to third parties Shares with multiple votes. Therefore, prior to any Transfer, the Selling Shareholder shall request that the Corporation convert the Offered Shares to an equal amount of common Corporate shares with the right to one (1) vote per share, under the terms established in the by-laws.
(c) If, for any reason, the Transfer of the Offered Shares to a third party does not occur within sixty (60) calendar days as of the expiration of the Exercise Period, the Selling Shareholder may only offer and/or perform a Transfer of Offered Shares, or any other Corporate Shares it may own, provided that it again grants Preemptive Rights to the rest of the Parties, and by the procedure described in Section V hereof.
Clause 5.09. Intervention of the National Commission for the Protection of Competition
In the event that, due to the nature of the respective purchase of Corporate Shares, authorization by the National Commission for the Protection of Competition (or by the body by which it may be substituted or replaced in the future in the functions established by Law No. 25,156) is previously required, the terms and procedures for the Transfer of Corporate Shares shall be subject to the following changes:
(a) the full acceptance of the sale offer mentioned in Clause 5.05 (c) shall be understood to be provided subject to the condition subsequent that the respective approval be obtained from the National Commission for the Protection of Competition;
(b) the ten (10) day term established for the completion of the operation of purchase and sale of the Offered Shares referred to in Clause 5.06(b)(v) shall be calculated as of the date of notification of the resolution of the National Commission for the Protection of Competition approving the operation;
(c) The Parties hereby undertake to perform, and to cause the Corporation to perform, as the case may be, all the actions, submissions and procedures required to obtain approval of the respective operation by the National Commission for the Protection of Competition or the respective body with similar powers, within the legal and regulatory terms established for such purpose;
(d) Should one of the Parties fail to comply with the obligation established in subsection (c) above, default shall not occur automatically in this case, but the complying Party must duly request that the non-complying Party fulfill the respective obligation within a term of no more than ten (10) days, under penalty of a daily fine of US$ 50,000; and
(e) If none of the Non-Selling Shareholders exercise their Preemptive Rights, the term in which the Transfer of Offered Shares must occur to avoid reinitiation of the procedure established in this Section V shall be extended from sixty (60) days (as established in Clause 5.08 (c)) to one hundred and twenty (120) days calculated as of the expiration of the Exercise Period.
SECTION VI
MISCELLANEOUS PROVISIONS
Clause 6.01. Term.
This Shareholders Agreement shall remain in full force and effect for a term of twenty (20) years as of its effective date, as established in Clause 6.03 (b) of this Shareholders Agreement.
Clause 6.02. Effects of the Shareholders Agreement Assignments.
The provisions of this Shareholders Agreement shall extend actively and passively to the Parties and to their respective successors. None of the Parties may assign this Shareholders Agreement, or the rights established herein, without the prior written consent of the other Parties.
Clause 6.03. Completion of the Shareholders Agreement. Effective Date.
(a) This Shareholders Agreement contains the entire agreement between the parties in relation to the matters constituting its purpose.
(b) This Shareholders Agreement shall become effective on April 14, 2017, unless it becomes effective earlier if, prior to such date, the Corporation effectively makes a public offering and/or negotiates all or part of its shares in the Argentine Republic or abroad.
(c) Subject to the effectiveness of this Shareholders Agreement, as established in § (b) of this Clause 6.03 and as of the date on which it becomes effective, this Shareholders Agreement shall supersede all prior verbal or written agreements, assertions and understandings between the Parties, including the 2004 Shareholders Agreement. The above shall apply notwithstanding the rights granted to any of the parties under the 2004 Shareholders Agreement, in any event, and regardless of whether or not this Shareholders Agreement becomes effective, Ricardo Navilli, Carlos Navilli, Adriana Navilli and Marcos Villemur hereby express their full approval of the governance, management and auditing of the Corporation (including its assets, distributions, activities and operations) carried out as of this date within the framework of the 2004 Shareholders Agreement (particularly in all matters related to the distribution of fees and distributions) and have absolutely no complaints in this regard.
Clause 6.04. Amendments and Waivers.
No supplementary provisions, amendments or reform of this Shareholders Agreement shall be binding unless they are issued in writing and signed by the Parties. Except as established in this Shareholders Agreement, no waiver shall be binding unless it is granted in writing by the Party against which the waiver must be effective. No waiver of any of the
provisions of this Shareholders Agreement shall be deemed or constitute a waiver of any other provision, whether similar or not, and no waiver shall constitute a permanent waiver. Failure or delay by any of the Parties in exercising any right, power or privilege established herein shall not constitute a waiver of such right, power or privilege, nor shall their singular or partial exercise prevent any other such exercise or subsequent exercise or the exercise of any other right, power or privilege.
Clause 6.05. Additional Warranties.
The Parties and, to the extent it is concerned, the Corporation, must immediately take the steps that are necessary or convenient, or cause them to be taken, sign additional documents and other documents, certificates, shareholders meeting minutes, amendments to the by-laws and other instruments and shall exercise the rights granted by the Shares, so as to ensure compliance with the provisions, purpose and spirit of this Shareholders Agreement to the fullest extent possible and guarantee that they become fully effective.
Clause 6.06. Severability.
Should any clause or provision of this Shareholders Agreement be invalid, illegal or unenforceable by virtue of a legal or public order provision, the rest of the clauses and provisions of this Shareholders Agreement shall nevertheless remain in full force and effect and such invalid, illegal or unenforceable clause or provision shall be immediately amended by the Parties as required to adjust it to applicable law or public order and implement it as consistently as possible with the original intent of the Parties.
Clause 6.07. Registered Legal Address. Notices.
For all purposes of this Shareholders Agreement, the Parties hereby constitute their registered legal addresses at the locations indicated in the header hereof, where all notices sent shall be valid.
Clause 6.08. Applicable Law. Dispute Resolution.
(a) This Shareholders Agreement and the rights and obligations of the Parties shall be construed and judged pursuant to the laws of the Argentine Republic.
(b) For the resolution of any dispute, discrepancy or difference with regard to the validity, effectiveness, interpretation, compliance with and/or performance of this Shareholders Agreement, the Parties shall accept the final award of the General Court of Arbitration of the Buenos Aires Stock Exchange, the Regulations of which
are known and accepted by the Parties, and whose award shall be final and unappealable. The Court shall issue an award under the Law.
(c) The provisions of this Clause 6.08 shall survive the termination of this Shareholders Agreement, regardless of its cause, and their validity shall be extended throughout the existence of disputes arising from the Shareholders Agreement.
Clause 6.09. Prevailing Agreement.
The provisions of this Shareholders Agreement shall prevail over any contradictory provision of the Corporate by-laws or regulations. Therefore, in case of doubt on the application, scope or interpretation of any clause of the by-laws or regulations, the provisions established in this Shareholders Agreement shall apply in every case. None of the Parties may invoke the provisions of the by-laws or regulations to breach or fail to comply with the provisions established in this Shareholders Agreement.
Clause 6.10. Acceptance by the Corporation.
The Corporation subscribes this Shareholders Agreement for the purpose of accepting and assuming without reservations each and every one of its obligations and commitments established directly or indirectly hereunder. Furthermore, the Corporation hereby undertakes to perform or refrain from performing, as the case may be, all acts that are necessary and/or convenient to fulfill (i) the common and irrevocable intent of the Parties expressed in this Shareholders Agreement and (ii) the purpose of this Shareholders Agreement and each and every one of its provisions.
IN WITNESS WHEREOF, the Parties have subscribed six (6) identical counterparts.
/S |
|
RICARDO ALBERTO NAVILLI |
|
|
|
/S |
|
CARLOS ADRIANO NAVILLI |
|
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|
/S |
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ALDO ADRIANO NAVILLI |
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|
/S |
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ADRIANA ELBA NAVILLI |
|
/S |
|
MARCOS VILLEMUR |
|
The following party has subscribed this Agreement for the purposes of notification, acceptance of its duties and the provision of its full approval:
/S |
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MOLINO CAÑUELAS S.A. |
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The following Parties hereby provide their conjugal consent and assent:
Annex I
SHAREHOLDERS OF MOLINO CAÑUELAS S.A.C.I.F.I.A
NUMBER |
|
CERTIFICATE |
|
NUMBER |
|
SHARES No. |
|
SUBSCRIBED |
|
NUMBER |
|
FULL NAME AND |
|
DOCUMENT |
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo Alberto NAVILLI |
|
|
3.000.000 |
|
25 TO 48 |
|
3.000.000 |
|
3,000,001 TO 6,000,000 |
|
3.000.000 |
|
3.000.000 |
|
Sarmiento 136- Laboulaye -(Prov. of Cba.) |
|
D.N.I. (National Identity Document) No. 13,420,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adriana Elba NAVILLI |
|
|
1.750.000 |
|
59 TO 72 |
|
1.800.000 |
|
7,250,001 TO 9,000,000 |
|
1.750.000 |
|
1.750.000 |
|
Av. Pellegrini 10 - Laboulaye - (Prov. of Cba.) |
|
D.N.I. No. 11,398,465 |
50.000 |
|
58 |
|
|
|
7,125,001 TO 7,175,000 |
|
50.000 |
|
50.000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aldo Adriano NAVILLI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.000.000 |
|
1 TO 24 |
|
3.000.000 |
|
1 TO 3,000,000 |
|
3.000.000 |
|
3.000.000 |
|
Ombú 3,075 - Buenos Aires |
|
D.N.I. No. 10,053,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Adriano NAVILLI |
|
|
3.000.000 |
|
73 TO 96 |
|
3.000.000 |
|
9,000,001 TO 12,000,000 |
|
3.000.000 |
|
3.000.000 |
|
Las Heras 41 - Laboulaye - (Prov. of Cba.) |
|
D.N.I. No. 12,657,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500.000 |
|
49 TO 52 |
|
500.000 |
|
6,000,001 TO 6,500,000 |
|
500.000 |
|
500.000 |
|
Adriana Elba NAVILLI |
|
D.N.I. No. 11,398,465 |
25.000 |
|
53 |
|
25.000 |
|
6,500,001 TO 6,525,000 |
|
25.000 |
|
25.000 |
|
Av. Pellegrini 10 - Laboulaye - (Prov. of Cba.) |
|
|
75.000 |
|
97 |
|
75.000 |
|
7,175,001 TO 7,250,000 |
|
75.000 |
|
75.000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225.000 |
|
54 |
|
225.000 |
|
6,525,001 TO 6,750,000 |
|
225.000 |
|
225.000 |
|
Marcos Aníbal Villemur |
|
|
375.000 |
|
55 TO 57 |
|
375.000 |
|
6,750,001 TO 7,125,000 |
|
375.000 |
|
375.000 |
|
Av. Pellegrini 10 - Laboulaye - (Prov. of Cba.) |
|
D.N.I. No. 26,974,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.000.000 |
|
|
|
|
|
|
|
12.000.000,00 |
|
12.000.000 |
|
|
|
|
Exhibit 10.2
AGREEMENT
This agreement between some of the shareholders of Molino Cañuelas S.A. (hereinafter referred to as the Agreement) is entered into in the city of Buenos Aires on January 18, 2017, by and between:
1. Mr. ALDO ADRIANO NAVILLI, with Documento Nacional de Identidad (National Identity Document) No. 10,053,805 and registered address at Ombú 3075, city of Buenos Aires (hereinafter referred to as Aldo Navilli) as party of the first part;
2. Mr. RICARDO ALBERTO NAVILLI, with National Identity Document No. 13,429,134 and registered address at Azucena Villaflor 489, piso 4, Rio 1, city of Buenos Aires (hereinafter referred to as Ricardo Navilli) as party of the second part;
3. Mr. CARLOS ADRIANO NAVILLI, with National Identity Document No. 12,657,137 and registered address at Rodríguez Peña 1560, piso 3°, city of Buenos Aires (hereinafter referred to as Carlos Navilli) as party of the third part; and
4. Ms. ADRIANA ELBA NAVILLI, with National Identity Document No. 11,398,465 and registered address at Las Heras 41, Laboulaye, Province of Córdoba (hereinafter referred to as Adriana Navilli) and Mr. MARCOS ANÍBAL VILLEMUR, with National Identity Document No. 26,927,403, with registered address at Las Heras 41, Laboulaye, Province of Córdoba (hereinafter referred to as Marcos Villemur) as party of the fourth part.
In this Agreement, Aldo Navilli, Ricardo Navilli and Carlos Navilli shall each be referred to as a Party. In addition, Adriana Navilli and Marcos Villemur, shall be jointly referred to as a single Party.
W H E R E A S
A. The Parties are shareholders of Molino Cañuelas S.A. (hereinafter referred to as Molino Cañuelas or the Corporation).
B. The Parties are also signatory parties of the Molino Cañuelas Shareholders Agreement executed on January 18, 2017 (hereinafter referred to as the Shareholders Agreement).
C. The Shareholders Agreement states that, with the exception of the matters defined therein as Relevant Matters, all decisions related to other matters in
relation to the management, governance and administration of Molino Cañuelas must be adopted with the agreement of at least three (3) parties to the Shareholders Agreement. In addition, all the parties to such Shareholders Agreement must comply and ensure compliance with the decisions of such majority, including through the different Corporate bodies, agents, representatives and officials.
D. It is the common intent of Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur to irrevocably provide in advance, for a term of five years, their approval of and consent to all of the acts of Corporate management, governance and auditing decided or recommended by Aldo Navilli.
Now, therefore, the Parties hereby agree to the following:
SECTION I
DEFINITIONS AND INTERPRETATION
Clause 1.01. Defined Terms.
In this Agreement, all the defined terms, of which the first letter of each word is capitalized and which are placed between quotations marks and underlined on initially defining their meaning (except if they are words at the beginning of a sentence or proper nouns and if so required by the context) shall have the meaning assigned to them in each case in the text of this Agreement or, as the case may be, in the Shareholders Agreement.
Clause 1.02. Interpretations.
Unless otherwise indicated or required by the context, in this Agreement or in relation to this Agreement:
(i) the titles of the Sections, Clauses and/or other sections of the Agreement are included only for better reference and shall be ignored for the purposes of their interpretation;
(ii) if so required by the context, the words and terms defined in singular form include the plural form and vice versa, and the words and terms defined in feminine gender form include the feminine, masculine and neutral gender forms;
(iii) all references to Articles, Sections or Clauses, unless otherwise expressly indicated, are references to the Articles, Sections or Clauses of this Agreement;
(iv) the expressions herein, hereunder, and other similar expressions used in this Agreement refer to this Agreement in its entirety, but not to a particular provision contained in it, unless otherwise expressly indicated;
(v) the expression including or comprising and other similar expressions used herein shall mean including but not limited to;
(vi) references to any person (including any Party) shall include the permitted successors (successors and/or assigns, either inter vivos and/or mortis causae, voluntary and necessary or legal), successors-in-interest, acquirers, beneficiaries, heirs, legatees and assignees of such person;
(vii) any accounting term and/or expression included herein that has not been defined herein or to which an express meaning has not been attributed shall have the meaning assigned to such term or expression by the generally accepted accounting principles of the Argentine Republic; and
(viii) the whereas clause hereof may be used for the purposes of determining the intention of the Parties on executing the Agreement.
SECTION II
PURPOSE OF THE AGREEMENT
Clause 2.01. Purpose.
Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur hereby provide their final, unconditional and irrevocable consent to and agreement and full approval of the performance of each and every one of the present and future actions and resolutions related to the Corporations management, governance and auditing (including in relation to its assets, activities, operation and any Relevant Matter) decided or recommended by Aldo Navilli, at his sole discretion. As of the date of this Agreement, the powers of Carlos Navilli, Adriana Navilli and Marcos Villermur under Section III of the Shareholders Agreement shall be assigned and delegated, to the fullest extent and without any reservations, to Aldo Navilli.
Clause 2.02. Duration.
The consent, agreement and approval, as well as the delegation of powers established in Clause 2.01 hereof are final, unconditional and irrevocable for a renewable term of five years, calculated as of the effective date of this Agreement as set forth under Clause 4.06.
Clause 2.03. Supplementary Actions.
At the sole request of Aldo Navilli, Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur, shall perform and ensure the performance and issue and have issued all of the documents and instruments that are necessary or convenient to implement and give full effect to the provisions of this Agreement, particularly Clauses 2.01 and 2.02. This obligation includes the duty to ensure that the officials, agents, bodies, proxies and other persons nominated or proposed for any position at the Corporation comply with their obligations.
SECTION III
SCOPE OF AUTHORIZATION AND DELEGATION
Clause 3.01. Scope of Consent and Delegation. Waivers.
Aldo Navilli shall not have the responsibility or obligation to exercise, either in whole or in part, the powers delegated in this Agreement or to fulfill or perform any actions consented to, approved or authorized hereunder.
Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur hereby sign a final, unconditional and irrevocable waiver, without reservations, to the fullest extent permitted by law, of their right to file, either directly or indirectly (including through the Corporation) any kind of present or future complaint, claim, action, lawsuit, proceeding or requirement, including in relation to any obligation, cost, loss, expense, damage, liability and/or detriment of any kind, whether direct or indirect, moral or material, resulting or arising from or on occasion of the provisions of this Agreement and/or in the management, governance and/or auditing of the Corporation (including its assets, activities and operation) against Aldo Navilli (or whomever may be designated by Aldo Navilli for the management of the Corporation), with the exception of willful misconduct against Aldo Navillis Corporation, as established by a final sentence issued by a judge with competent jurisdiction, with the authority of res judicata. Carlos Navilli, Ricardo Navilli, Adriana Navilli and Marcos Villemur shall jointly indemnify and hold Aldo Navilli harmless from and against any claims filed by third parties based on the management, governance or auditing of the Corporation.
SECTION IV
MISCELLANEOUS PROVISIONS
Clause 4.01. Amendments and Waivers. Termination.
No supplementary provisions, amendments or reform of this Agreement shall be binding unless they are issued in writing and signed by all the Parties. No waiver of any of the provisions of this Agreement shall be deemed or constitute a waiver of any other provision, whether similar or not, and no waiver shall constitute a permanent waiver.
Failure or delay by any of the Parties in exercising any right, power or privilege established herein shall not constitute a waiver of such right, power or privilege, nor shall their singular or partial exercise prevent any other such exercise or subsequent exercise or the exercise of any other right, power or privilege.
Aldo Navilli may, at any time, terminate this Agreement either in whole or in part, without prior notice or communication or prior notification of any kind and without any liability or compensation whatsoever. It is hereby expressly established that in no case shall such termination be deemed untimely or result in any kind of claim. Termination shall not apply to the provisions of Clause 3.01 hereof.
Clause 4.02. Additional Warranties.
The Parties and, to the extent it is concerned, the Corporation, must immediately take the steps that are necessary or convenient, or cause them to be taken, sign additional documents and other documents, certificates, shareholders meeting minutes, amendments to the by-laws and other instruments and shall exercise the rights granted by the Shares, so as to ensure compliance with the provisions, purpose and spirit of this Agreement to the fullest extent possible and guarantee that they become fully effective. The provisions of this Agreement shall extend actively and passively to the Parties and to their respective successors.
Clause 4.03. Severability.
Should any clause or provision of this Agreement be invalid, illegal or unenforceable by virtue of a legal or public order provision, the rest of the clauses and provisions of this Agreement shall nevertheless remain in full force and effect and such invalid, illegal or unenforceable clause or provision shall be immediately amended by the Parties as required to adjust it to applicable law or public order and implement it as consistently as possible with the original intent of the Parties.
Clause 4.04. Registered Legal Address. Notices.
For all purposes of this Agreement, the Parties hereby constitute their registered legal addresses at the locations indicated in the header hereof, where all notices sent shall be valid.
Clause 4.05. Applicable Law. Dispute Resolution.
(a) This Agreement and the rights and obligations of the Parties shall be construed and judged pursuant to the laws of the Argentine Republic.
(b) For the resolution of any dispute, discrepancy or difference with regard to the validity, effectiveness, interpretation, compliance with and/or performance of
this Shareholders Agreement, the Parties shall accept the final award of the General Court of Arbitration of the Buenos Aires Stock Exchange, the Regulations of which are known and accepted by the Parties, and whose award shall be final and unappealable. The Court shall issue an award under the Law.
(c) The provisions of this Clause 4.05 shall survive the termination of this Agreement, regardless of its cause, and their validity shall be extended throughout the existence of disputes arising from the Agreement.
Clause 4.06. Prevailing Agreement.
The provisions of this Agreement shall prevail over any contradictory provision of the Corporate by-laws or regulations. Therefore, in case of doubt on the application, scope or interpretation of any clause of the by-laws or regulations, the provisions established in this Agreement shall apply in every case. None of the Parties may invoke the provisions of the by-laws, regulations or Shareholders Agreement to breach or fail to comply with the provisions established in this Agreement.
This Agreement shall become effective at the same time at which the Shareholders Agreement becomes effective.
Clause 4.07. Acceptance by the Corporation.
The Corporation subscribes this Agreement for the purpose of accepting and assuming without reservations each and every one of its obligations and commitments established directly or indirectly hereunder. Furthermore, the Corporation hereby undertakes to perform or refrain from performing, as the case may be, all acts that are necessary and/or convenient to fulfill (i) the common and irrevocable intent of the Parties expressed in this Agreement and (ii) the purpose of this Agreement and each and every one of its provisions.
IN WITNESS WHEREOF, the Parties have subscribed five (5) identical counterparts.
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CARLOS ADRIANO NAVILLI |
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RICARDO ALBERTO NAVILLI |
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ALDO ADRIANO NAVILLI |
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ADRIANA ELBA NAVILLI |
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MARCOS VILLEMUR |
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The following party has subscribed this Agreement for the purposes of notification, acceptance of its duties and the provision of its full approval:
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MOLINO CAÑUELAS S.A. |
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Exhibit 10.3
TRADUCCIÓN PÚBLICA
[El documento es un original que consta de 38 páginas]
Offer for Purchase of Assets and Transfer of Personnel Signature Version
OFFER LETTER
City of Buenos Aires, June 22, 2016
Cargill S.A.C.I.
Av. Leandro N. Alem 928, Piso 2do.,
City of Buenos Aires
Attn: Legal Department
Re: Irrevocable Offer for the Purchase of Assets and Transfer of Personnel
Dear Sirs,
Molino Cañuelas SA.C.I.F.I.A., a corporation organized and operating under the laws of the Argentine Republic (hereinafter referred to as the Buyer) is pleased to submit this Offer Letter to Cargill S.A.C.I., a corporation organized and operating under the laws of the Argentine Republic (hereinafter referred to as the Seller) to purchase certain assets owned by the Seller and contract certain personnel employed by the Seller, under the terms and conditions and as indicated in Attachment I to this document (this Offer Letter, including its Attachment I, the Offer).
The Offer is irrevocable, shall become effective as of its receipt by the Seller and shall remain in effect for a term of five (5) business days (the Effective Term). This Offer shall be deemed validly accepted by the Seller by express notice duly provided to the Buyer at the following registered address, within the Effective Term: Molino Cañuelas SA.C.I.F.I.A., Av. de Mayo 560, Piso 1°, City of Buenos Aires, Argentine Republic, Attn: Daniel H. Ercoli.
Once this Offer is accepted by the Seller, it shall constitute the sole agreement between the Buyer and the Seller on its subject matter and shall supersede any other prior oral or written agreement between the Buyer and the Seller. The application of Section 982 and related sections of the Civil and Commercial Code with regard to partial agreements is hereby expressly excluded and, as a result, there shall be no agreement whatsoever until the Acceptance.
Sincerely,
Molino Cañuelas SA.C.I.F.I.A., in its capacity as Buyer
Signature: [illegible signature]
Printed Name: Carlos Adriano Navilli
Position: Proxy
[stamp:] SIGNATURE CERTIFIED BY NOTARIAL DOCUMENT STAMP No. F012734724
[illegible signature and stamp:] NOTARY. LIC. No. [illegible]
ATTACHMENT I
Terms and Conditions of the Offer
SECTION 1: Definitions; Other Defined Terms and Interpretation
Section 1.1. Definitions |
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Section 1.2. Other Defined Terms |
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SECTION 2: Sale and Transfer of Assets; Transfer of Personnel; Transfer of Assumed Contracts; Price- |
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Section 2.1. Sale and Transfer of Assets |
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Section 2.2. Transfer of Personnel |
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Section 2.3. Transfer of Assumed Contracts |
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Section 2.4. Price |
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SECTION 3: Prior Conditions; Completion; Actions After End Date |
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Section 3.1. Conditions Prior to Completion |
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Section 3.2. Conduct of Seller Activity between Effective Date and Completion Date |
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Section 3.3. Completion Date |
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Section 3.4. Completion Procedures |
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Section 3.5. Actions following Completion |
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SECTION 4: Seller Representations and Warranties |
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Section 4.1. Incorporation; Legal Capacity |
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Section 4.2. Sellers Powers and Authorizations; Binding Agreement |
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Section 4.3. Approvals; No Conflict |
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Section 4.4. Ownership of Assets; No Legal Actions in Relation to Assets |
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Section 4.5. Labor Matters |
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Section 4.6. Permits and Authorizations; No Statement on Seller Activity |
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Section 4.7. Offered Brands; Offered Patent |
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SECTION 5: Buyer Representations and Warranties |
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Section 5.1. Incorporation; Legal Capacity |
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Section 5.2. Buyers Powers and Authorizations; Binding Agreement |
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Section 5.3. Approvals; No Conflicts |
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Section 5.4. Information on Assets, Personnel and Assumed Contracts |
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Section 5.5. Independent Analysis |
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Section 5.6. Rejection of Warranties; No Recourse |
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SECTION 6: Authorization of the CNDC [Argentine Committee for the Protection of Competition], the Brazilian Competition Authority and Foreign Competition Authorities |
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Section 6.1. Request for Authorization from the CNDC |
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Section 6.2. Conditions to or Rejection of Authorization by the CNDC |
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Section 6.3. Request for Authorization from the Brazilian Competition Authority; Foreign Competition Authorities |
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Section 6.4. Conditions to or Rejection of Authorization by the Brazilian Competition Authority |
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Section 6.5. No Recourse |
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SECTION 7: Environmental Matters |
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Section 7.1. Environmental Matters |
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SECTION 8: Transfer of Personnel |
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Section 8.1. Transfer of Personnel |
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Section 8.2. Seller Cooperation |
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SECTION 9: Transfer of Offered Brands; Offered License for Patent Use; Gratuitous Loan |
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Section 9.1. Transfer of Offered Brands |
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Section 9.2. License for Use of Offered Patent |
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Section 9.3. Gratuitous Loan |
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Section 9.4. Transfer of Offered Software |
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SECTION 10: Transfer of Assumed Contracts |
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Section 10.1. Assumed Contracts |
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SECTION 11: Technical Support Service |
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Section 11.1. Technical Support Service |
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SECTION 12: Transfer of Inventories of Raw Materials and Products |
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Section 12.1. Sale and Transfer of Inventories |
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Section 12.2. Price of Inventories |
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SECTION 13: INDEMNITY |
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Section 13.1. Sellers Obligation of Indemnification |
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Section 13.2. Buyers Obligation of Indemnification |
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Section 13.3. Effective Term |
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Section 13.4. Claim Procedure |
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Section 13.5. Third-Party Claim Procedure |
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Section 13.6. Payments |
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Section 13.7. Damage Mitigation |
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SECTION 14: General Provisions |
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Section 14.1. Confidentiality |
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Section 14.2. Non-Competition within the Territory |
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Section 14.3. Entire Agreement |
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Section 14.4. Amendments and Waivers |
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Section 14.5. Applicable Law and Jurisdiction |
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Section 14.6. Expenses |
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Section 14.7. Notices |
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Section 14.8. Severability |
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Section 14.9. Successors and Assigns; Third Parties; Prohibition of Assignment |
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LIST OF ANNEXES
1) Annex 2.1 (a): Plants
2) Annex 2.1 (b): Machinery
3) Annex 2.1 (c): Vehicles and Other Registrable Personal Property
4) Annex 2.1 (d): Other Assets
5) Annex 2.2 (a): List of Personnel (including indication of their seniority, salaries, bonuses, additional benefits and workplace, and list of legal attachments in effect on employee salaries)
6) Annex 2.2 (a) (i): Management Personnel and Directors of Plant Operations
7) Annex 2.2 (b): Sample of Personnel Transfer Notice
8) Annex 2.2 (c): Balances Owed by Personnel
9) Annex 2.3: (i) Assumed Contracts with Clients and (ii) Assumed Contracts with Suppliers
10) Annex 3.5 (e): Employee Housing Rental Agreements
11) Annex 4.4 (a): Encumbrances on Plants
12) Annex 4.4 (b) (i): Copy of Notarized Deeds of Plants
13) Annex 4.4 (b) (ii): Copy of Plan Containing the Sections and Constructions Constituting the Plants
14) Annex 4.4 (c): Pending Legal Actions and Proceedings against the Seller
15) Annex 4.6: Permits
16) Annex 9.1 (a): Offered Brands
17) Annex 9.1 (b) (i): Price of Offered Brands
18) Annex 9.1 (b) (ii): Sample of Brand Transfer Offer
19) Annex 9.2: Sample of Offer of License for Patent Use; Copy of Offered Patent
20) Annex 9.3: Sample of Gratuitous Loan Offer
21) Annex 9.4: Offered Software and Sample of Software Transfer Offer
22) Annex 10.1: Sample of Letter of Contractual Position Assignment
23) Annex 10.1 (f): Assumed Contracts of Clients with Price
24) Annex 10.1 (g): Assumed Contract of Client with Advance
25) Annex 12.1: Determination of Price of Inventories
SECTION 1: Definitions; Other Defined Terms and Interpretation
Section 1.1. Definitions. The following terms shall have the meaning assigned to them below:
Sellers Activity means the Sellers industrial and commercial activity of wheat milling of any kind and marketing of flour and wheat milling by-products conducted by the Seller with the Assets.
Assets shall have the meaning assigned to the term in Section 2.1.
Agreement means the Offer once accepted by the Seller under its terms.
Affiliate means, with respect to a person, any other person that directly or indirectly controls such person, is controlled by such person or is under common control with such person. For the purposes of this Offer, control or controlled means, with respect to a person, any person that directly or indirectly owns 10% or more of such persons capital stock or that has the power to manage or cause the management of the policies and administration of such person, either through the ownership of corporate stock, by contract or in any other way.
CADE Authorization has the meaning indicated in Section 3.1 (c).
Argentina means the Argentine Republic.
Brazilian Competition Authority or CADE (Administrative Council for Economic Defense) means the Government Agency with jurisdiction with regard to the defense of competition within the Federative Republic of Brazil, with the authority to review and authorize the Sale and Transfer.
Foreign Competition Authorities means all Government Agencies with jurisdiction with regard to the defense of competition of foreign countries, with the authority to review and authorize the Sale and Transfer, with the exception of the Brazilian Competition Authority.
Completion has the meaning indicated in Section 3.3.
Gratuitous Loan has the meaning indicated in Section 9.3.
Buyer means Molino Cañuelas SA.C.I.F.I.A., a corporation organized and existing under the laws of Argentina.
CNDC means the National Committee for the Protection of Competition or the Domestic Trade Office of the Ministry of Economy and Public Finance or the National Court for the Protection of Competition or any other Argentine court or public agency organized under Law No. 25,156 and its amendments.
Prior Conditions has the meaning indicated in Section 3.1.
Assumed Contracts means all contracts executed by the Seller to be assigned to the Buyer and/or assumed by the Buyer, listed in Annex 2.3 and those indicated in Annex 12.1, which shall be updated as of the Completion Date, considering those including pending obligations after such Completion Date.
Assumed Contracts with Clients means the Assumed Contracts listed in Annex 2.3 (i).
Assumed Contracts with Suppliers means the Assumed Contracts listed in Annex 2.3 (ii).
Seller Account means the account indicated by the Seller to the Buyer five (5) Business Days in advance of the Completion Date.
Business Day means any day that is not Saturday, Sunday or any day on which banks are authorized or obligated to close their operations in the city of Buenos Aires, Argentina or in the United States of America.
Documents of the Operation means the Offer, the Agreement, the Deeds, any contract and/or notice of assignment of rights and/or assumption of obligations in relation to the Assumed Contracts and releasing the Seller from its responsibility under them, the Offer of License for Patent Use, the Brand Transfer Offer, the Gratuitous Loan Offer, and any other document and/or instrument required to implement the Sale and Transfer.
Dollars and the US$ sign mean US dollars, i.e. the legal tender in the United Stated of America.
Government Agency means any regulatory or administrative authority, agency, registry or committee of the national, state, provincial or municipal government or a similar body, or any quasi-governmental or state body with regulatory or fiscal authority or any other governmental or quasi-governmental powers, including any administrative or judicial tribunal or court or any other judicial authority or public or private court of arbitration of any country or of any sub-national division of a country, or any of its offices, agencies, committees or authorities.
Deeds has the meaning indicated in Section 3.4 (a) (i).
Completion Date has the meaning specified in Section 3.3.
Effective Date means the date on which the Offer is accepted by the Seller under its terms.
Encumbrance means mortgages, pledges, rights of use, easements, collateral, court or administrative orders of attachments, injunctions, encumbrances, charges, third-party contractual rights, trusts, options and restrictions of any nature to the use and/or availability of an asset in favor of third parties, whether they be natural or legal persons.
Confidential Information has the meaning indicated in Section 14.1.
Inventories has the meaning indicated in Section 12.1.
ECL means Law No. 20,744 and its amendments.
Applicable Law means all laws in effect in Argentina.
Machinery has the meaning indicated in Section 2.1 (b).
Offered Brands has the meaning indicated in Section 9.1 (a).
Affiliate Brands Offered has the meaning indicated in Section 9.1 (a).
Seller Brands Offered has the meaning indicated in Section 9.1 (a).
Notice of Claim has the meaning indicated in Section 13.5 (a).
Notice of Assumption of Defense has the meaning indicated in Section 13.5 (b).
Offer means this Irrevocable Offer for the Purchase of Assets and Transfer of Personnel dated June 16, 2016, in addition to this Attachment I.
Gratuitous Loan Offer has the meaning indicated in Section 9.3.
Offer of License for Patent Use has the meaning indicated in Section 9.2 (b).
Brand Transfer Offer has the meaning indicated in Section 9.1 (b).
Software Transfer Offer has the meaning indicated in Section 9.4.
Other Assets has the meaning indicated in Section 2.1 (d).
Offered Patent has the meaning indicated in Section 9.2 (a).
Parties means the Seller and Buyer, jointly.
Indemnitee has the meaning indicated in Section 13.4.
Indemnitor has the meaning indicated in Section 13.4.
Losses means direct damages, including (reasonable and documented) legal expenses, interest and fines.
Indemnity Period has the meaning indicated in Section 13.3.
Permits has the meaning indicated in Section 4.6.
Person means any natural or legal person, corporation, partnership, cooperative, trust or organization without legal capacity, or any government, government agency or political subdivision.
Personnel has the meaning indicated in Section 2.2 (a).
Pesos and the AR$ sign means the legal tender in Argentina.
Plants has the meaning indicated in Section 2.1 (a).
Term of Service has the meaning indicated in Section 11.1.
Price has the meaning indicated in Section 2.4 (a).
Price of Inventories has the meaning indicated in Section 12.2.
Claim has the meaning indicated in Section 13.4.
Third-Party Claim has the meaning indicated in Section 13.5 (a).
Restrictions has the meaning indicated in Section 2.4 (d).
Technical Support Service has the meaning indicated in Section 11.1.
Offered Software has the meaning indicated in Section 9.4.
Territory means the Argentine Republic, the Republic of Paraguay and the Oriental Republic of Uruguay.
Reserved Wheat has the meaning indicated in Section 10.1 (f).
Vehicles and Other Registrable Personal Property has the meaning indicated in Section 2.1 (c).
Seller means Cargill S.A.C.I., a corporation organize and existing under Argentine law.
Sale and Transfer means the joint sale and transfer of Assets, transfer of Personnel and assumption of the Sellers contractual position in the Assumed Contracts, under these terms and conditions.
Section 1.2. Other Defined Terms. The terms hereof, herein, by virtue hereof and similar terms used in this document shall refer to this Offer in its entirety and not to a provision in particular, unless otherwise indicated.
References to Sections, Annexes or Appendixes shall be to Sections, Annexes or Appendixes of this Offer, unless otherwise specifically indicated. Any of the terms defined in Section 1.1. may, unless otherwise required by the context, be used in singular or plural form, depending on the reference. Include, includes and including shall be deemed to be followed by the phrase but not limited to, regardless of whether or not such phrase is included. When terms are used in neutral gender form in this document, they must be interpreted as if they were also used in their feminine or masculine forms in all cases in which the use of such gender is applicable.
SECTION 2: Sale and Transfer of Assets; Transfer of Personnel; Transfer of Assumed Contracts; Price-
Section 2.1. Sale and Transfer of Assets. If the Offer is accepted, subject to the terms and conditions established herein, on the Completion Date, the Seller shall sell and transfer to the Buyer, and the Buyer shall purchase and receive from the Seller, as is and in agreement, the following assets (the Assets):
(a) the real property listed in Annex 2.1 (a), with all constructions in each of them (the Plants);
(b) the equipment and machinery listed in Annex 2.1 (b) (the Machines);
(c) the vehicles and other registrable personal property listed in Annex 2.1 (c) (the Vehicles and Other Registrable Personal Property); and
(d) the facilities, furniture and other fixed assets in the Plants, in addition to the computer and telephone equipment listed in the inventory attached hereto as Annex 2.1 (d) (the Other Assets).
Section 2.2. Transfer of Personnel. (a) If this Offer is accepted, subject to the terms and conditions established herein, on the Completion Date, the Seller shall transfer to the Buyer, and the Buyer shall contract in agreement, the personnel listed in Annex 2.2 (a) (the Personnel). Notwithstanding the foregoing provision, the Buyer shall grant the Seller a term of thirty (30) calendar days as of the Effective Date for the Seller to determine if it wishes to retain any person included in the Personnel deemed key and strategic, with the exception of managers and directors of operations of the Plants indicated in Annex 2.2 (a) (i). However, if the Seller wishes to retain any of the persons listed in Annex 2.2 (a) (i), it may do so provided that it grants a term of up to forty-five (45) calendar days as of the date on which the Seller notifies the Buyer of such circumstance for such persons to train those that shall replace them in their respective positions, for which the Seller shall bear all related costs.
(b) The transfer of Personnel shall be performed under the terms of Section 225 of the ECL, effective on the Completion Date, without requiring any other action, measure, consent, approval or instrument. Notwithstanding the foregoing provision, the Buyer and Seller shall notify the Personnel of the transfer of their employment contracts to the Buyer pursuant to the sample letter attached hereto as Annex 2.2 (b).
(c) In addition to the transfer of Personnel, the Seller shall assign to the Buyer the right to collect the balances owed by the personnel indicated in Annex 2.2 (c) by virtue of the loans granted by the Seller, pursuant to its Housing Loan Policy Argentina and Miscellaneous and/or Emergency Loan Policy Argentina, also indicated in Annex 2.2 (c).
Section 2.3. Transfer of Assumed Contracts. If this Offer is accepted, subject to the terms and conditions established herein, on the Completion Date, the Buyer shall assume the contractual position of the Seller in each of the contracts listed in Annex 2.3 (the Assumed Contracts).
Section 2.4. Price. (a) The sale and transfer of Assets, the transfer of Personnel, the assumption of the Sellers contractual position in the Assumed Contracts and the non-compete obligation assumed by the Seller in Section 14.2 shall be performed for a total and final price of thirty million, seven hundred and sixty thousand US Dollars (US$ 30,760,000) as the price (the Price), plus the Value Added Tax, as appropriate.
(b) The Price shall be paid in US Dollars on the Completion Date, simultaneously with the performance of the remaining Completion Procedures, by the transfer to be made by the Buyer to the Sellers Account of the amount of thirty million, seven hundred and sixty thousand US Dollars (US$ 30,760,000), plus the Value Added Tax for applicable categories (tax to be paid in Pesos at the exchange rate used by the Banco de la Nación Argentina for its dollar bill sale operations on closing its operations on the Business Day immediately preceding the invoice date) and net of any tax
withholdings that may apply. The Price shall be understood to be paid once it is credited to the Sellers Account.
(c) Notwithstanding the indemnities provided for under this Offer, it is an essential condition for the acceptance of the Offer by the Seller that the Buyer accept that in no case shall the Price be adjusted or reduced.
(d) The Buyer hereby acknowledges and accepts that the obligation to pay the Price (and/or any other amount owed in relation to this Offer and/or the Agreement, with the exception of the Value Added Tax and any payments that may be required for Inventories) exclusively in Dollars, in funds immediately and freely available outside of Argentina, and without any compensation, defense or claim of any kind, is essential to the Seller. The Buyer hereby acknowledges and irrevocably and unconditionally accepts the risks of purchasing Dollars in Argentina and transferring Dollars outside of Argentina in order to pay the Price (and/or any other amount due in Dollars in relation to this Offer and/or the Agreement, with the exception of the Value Added Tax and any payments that may be required for Inventories), as well as the possible fluctuation of the exchange rate, both in domestic and international markets; and that none of the abovementioned events shall prevent the payment of the Price (and/or any other amount due in Dollars in relation to this Offer and/or the Agreement, with the exception of the Value Added Tax and any payments that may be applicable for Inventories) in Dollars to the Sellers Account. The Buyer accepts that no circumstance (including any law, rule, regulation or measure taken by the Government Agency) that may affect the free availability and transfer of the Dollars, the fluctuation of prices or the impossibility of accessing the exchange markets (including delays in or the denial of any approval of purchase and/or transfer of Dollars by any regulatory authority in Argentina or any other jurisdiction, if necessary) (the Restrictions) shall be deemed an extraordinary or unforeseen event, under applicable law. The Buyer hereby expressly, unconditionally and irrevocably waives the right to invoke any currently applicable or future law, rule or regulation, including any exchange regulation applicable to the circumstances indicated in this Section 2.4 (d), the theory of unforeseen circumstances, the principle of shared effort and/or any other similar theory that may be invoked to abstain from making the full payment of the Price in Dollars to the Sellers Account (and/or any other amount due in Dollars in relation to this Offer and/or the Agreement, with the exception of the Value Added Tax and any payments that may be required for Inventories), including Section 765 of the National Civil and Commercial Code.
(e) Notwithstanding the waivers made by the Buyer in Section 2.4 (d), should there be any Restrictions legally preventing or restricting the Buyers payment of the Price (and/or any other amount due in Dollars in relation to this Offer and/or the Agreement) in Dollars abroad, the Buyer must, at the Sellers option: (i) acquire such Dollars by the purchase, with Pesos, of public bonds issued by the National
Argentine Government in Argentina (or any other securities), denominated in Dollars, and the subsequent transfer and sale of such securities abroad for Dollars, so that their sale in a foreign stock market, and net of taxes, costs, fees and expenses, results in a Dollar amount equal to any amount due in Dollars under this Offer and/or Agreement; (ii) provide the Seller with (1) the required amount of Pesos for acquiring public bonds issued by the National Argentine Government in Argentina (or any other securities), denominated in Dollars, or (2) the required amount of public bonds issued by the National Argentine Government in Argentina (or any other securities), denominated in Dollars, so that their transfer and sale in a foreign stock market, net of taxes, costs, fees and expenses, results in a Dollar amount equal to any amount due in Dollars by virtue of this Offer and/or Agreement; or (iii) purchase Dollars through any other legal and valid mechanism existing as of the payment date in Argentina or abroad. In any of the abovementioned alternatives, the Price shall only be deemed paid once the exact amount in Dollars owed as the Price under this Offer is effectively credited to the Sellers Account. The Buyer shall bear any expenses, costs, fees and taxes related to the mechanisms described in this Section 2.4 (e).
SECTION 3: Prior Conditions; Completion; Actions After End Date
Section 3.1. Conditions Prior to Completion. The operations provided for in Section 3.4 shall be subject to the fulfillment (or exemption provided in writing up to the maximum extent allowed by Applicable Law) of the following prior conditions by the Completion Date (the Prior Conditions):
(a) each of the representations and warranties of the Seller and Buyer contained in Section 4 and Section 5 of this Offer, respectively, must be true and correct as of the Completion Date (with the exception of those that were made as of a specific date, in which case such representation and warranty must be true and correct as of such date);
(b) each of the obligations and commitments undertaken by the Seller and/or Buyer and that must be fulfilled by the Seller and/or Buyer, respectively by the Completion Date under the terms of this Offer, must have been fully fulfilled by the Seller and/or Buyer, as the case may be, by the Completion Date; and
(c) The Sale and Transfer must have been authorized by the Brazilian Authority for the Protection of Competition (the CADE Authorization).
Section 3.2. Conduct of Seller Activity between Effective Date and Completion Date. (a) The Seller hereby undertakes to continue the Sellers Activity in the usual and ordinary manner until the Completion Date and, especially, not to perform any actions exceeding the regular performance of the Sellers Activity and not to assume any unusual or additional obligations to those strictly necessary to
maintain the normal and ordinary course of business of the Sellers Activity. Therefore, as of the Effective Date and until the Completion Date, the Seller shall abstain from:
(i) performing actions of disposal related to the Assets, with the exception of those actions of disposal that are part of the ordinary performance of the Sellers Activity, and at the values and under the conditions prevailing in the market;
(ii) using the Assets as collateral; and
(iii) totally or partially amending, terminating or rescinding any Assumed Contracts with Clients.
Section 3.3. Completion Date. (a) Subject to the fulfillment of each and every one of the Prior Conditions, the actions provided for in Section 3.4 must be completed during completion (the Completion), which shall take place on August 31, 2016, at 12:00 p.m. (the Completion Date) at the office of Estudio Marval, OFarrell y Marval, in the city of Buenos Aires. Notwithstanding the foregoing provision, if all of the Prior Conditions have not been fulfilled or waived by 31 August, 2016, the Completion Date shall be the last Business Day of the month on which all of the Prior Conditions have been fulfilled or waived.
(b) The Buyer and Seller hereby undertake to use their best efforts to fulfill each and every one of the Prior Conditions. If they fail to do so prior to December 31, 2016, there shall be no Completion and the Agreement shall be null and void, unless the CADEs Authorization remains pending due to causes not attributable to the Parties or by an action or omission attributable to the legal advisors designated by mutual agreement of the Parties, in which case the Completion Date shall be postponed until the CADEs Authorization is granted.
(c) If Completion does not occur and the Agreement becomes null and void pursuant to Section 3.3 (b) above, the Party responsible for the non-occurrence of the Prior Conditions shall pay to the other Party an amount of ten million Dollars (US$ 10,000,000) as a penalty, under the terms of Section 790 and subsequent sections of the National Civil and Commercial Code.
(d) Should CADE reject the Sale and Transfer due to a cause not attributable to either of the Parties, the Agreement shall be null and void. Notwithstanding the foregoing provision and subject to CADE approval, if applicable, the Seller hereby undertakes to sell the Sellers Activity to an independent third party proposed by the Buyer within a term of fifteen (15) months following notification of CADEs rejection, and shall perform the Sale and Transfer under the same terms and conditions as those established under this Agreement. The third party shall provide the appropriate guarantees, to the Sellers full satisfaction, to ensure fulfillment of the obligations to be met by virtue of the agreement to be executed, including CADE notification, if necessary. Once the abovementioned term has elapsed without the Buyer proposing a third party for the purchase of the Sellers Activity, the Buyer must pay
to the Seller an amount of Three Million Dollars (US$ 3,000,000) as sole and final compensation, which must be paid within ten (10) calendar days as of the expiration of the abovementioned term.
Section 3.4. Completion Procedures. Subject to the fulfillment of each and every one of the Prior Conditions, on the Completion Date, the Parties shall perform the following actions:
(a) Procedures to be conducted by the Seller and the Buyer on the Completion Date:
(i) The Seller and Buyer shall subscribe the notarized deeds transferring ownership of the Plants before the Notaries designated by the Buyer, who shall be designated by the Buyer at least thirty (30) days prior to the Completion Date, under terms acceptable to the Parties (the Deeds).
(ii) The Seller and Buyer shall inform the Personnel of the transfer of their employment contracts to the Buyer pursuant to the letter sample under Annex 2.2 (b), and in the cases indicated in Annex 2.2 (c), the assignment to the Buyer of the balances owed by such employees by virtue of the loans granted by the Seller under its Housing Loan Policy Argentina and Miscellaneous and/or Emergency Loan Policy Argentina.
(b) Procedures to be conducted by the Seller on the Completion Date:
(i) The Seller shall transfer possession of the Assets to the Buyer.
(ii) The Seller shall transfer ownership and possession of the Inventories to the Buyer, as well as any other instruments required to document the sale of Inventories.
(ii) The Seller shall accept the Gratuitous Loan Offer.
(iv) The Seller shall provide the Buyer with the following documents:
(1) signed original of the documents and forms required for the transfer to the Buyer of the Machinery, Vehicles and Other Registrable Personal Property;
(2) letter duly subscribed by the Sellers proxy with sufficient powers, certifying that (i) the representations and warranties established in Section 4 continue to be true, correct and complete, and (ii) the obligations and commitments undertaken by the Seller which were to be fulfilled by the Seller by the Completion Date under the terms of this Offer have been met by the Seller by the Completion Date;
(3) receipt for the Price payment; and
(4) receipt for payment of the Price of Inventories.
(c) Procedures to be conducted by the Buyer on the Completion Date:
(i) The Buyer shall pay the Price to the Seller as indicated in Section 2.4.
(ii) Subject to acceptance by each of the counterparties to the Assumed Contracts, the Buyer shall assume the Sellers contractual position in each of the Assumed Contracts, as indicated in Section 10.
(iii) The Buyer shall accept the Brand Transfer Offer and the Offer of License for Patent Use.
(iv) The Buyer shall provide the Seller with a letter duly subscribed by the Buyers proxy with sufficient powers, certifying that (i) the representations and warranties established in Section 5 continue to be true, correct and complete, and (ii) the obligations and commitments undertaken by the Buyer which were to be fulfilled by the Buyer by the Completion Date under the terms of this Offer have been met by the Buyer by the Completion Date.
(v) The Buyer shall pay to the Seller the Price of Inventories, as indicated in Section 12.2.
Section 3.5. Actions following Completion. After Completion:
(a) The Buyer undertakes to ensure the transfer of each of the Permits and hereby undertakes to hold the Seller harmless from and against any claim that may be made until their effective transfer.
(b) The Parties hereby undertake to provide the notice mentioned in Section 8 of Law No. 25,156 to the CNDC within seven (7) calendar days as of the Completion Date, submitting all documentation and information required for such purpose, and to respond to any comment or requirement made by the CNDC as soon as possible, but in any case within the terms established by law.
(c) The Parties shall provide each other with the cooperation and information that is reasonably required with respect to the procedures and presentations required by any agency in relation to the Assets, Permits and any other procedure required to ensure the continuation of the Sellers Activity, as soon as possible and in any case especially considering the terms established by the respective bodies in each case.
(d) The Parties shall establish by mutual agreement the procedure to determine the value of the services for Plant operation (including power, gas, water, etc.) received prior to the Completion Date, pending invoicing, which shall be borne by the Seller.
(e) The Buyer hereby undertakes to ensure the substitution of the guarantee granted by the Buyer under the employee housing rental agreements indicated in Annex 3.5 (e).
SECTION 4: Seller Representations and Warranties
The Seller hereby represents and warrants to the Buyer that, on the Effective Date and on the Completion Date (with the exception of those that were made on a specific date, in which case such representation and warranty must be true and correct as of such date):
Section 4.1. Incorporation: Legal Capacity. The Seller is a corporation duly organized under Argentine Law and registered with the Inspección General de Justicia [Superintendence of Corporations].
Section 4.2. Sellers Powers and Authorizations; Binding Agreement. (a) The Seller has full powers and corporate authority to execute each of the Documents of the Operation to which it is a party, and to fulfill its obligations thereunder.
(b) Once the Offer is accepted under its terms, the Agreement and other Documents of the Operation shall constitute valid and binding obligations of the Seller, which shall be enforceable under their terms.
Section 4.3. Approvals; No Conflict. (a) Once the Offer has been accepted under its terms, except as provided for in Section 6 and in Section 10, the signing, granting and fulfillment of the Sellers obligations under the Documents of Operation to which it is a party shall not require the prior or subsequent receipt of approvals or authorizations by Government Agencies or third parties.
(b) Assuming that the approvals provided for under Section 6 and Section 10 are obtained, the execution of the Documents of Operation to which it is a party, compliance with the Sellers obligations thereunder and the performance of the operations provided for therein: (i) shall not be inconsistent with or breach the Sellers documents of incorporation; (ii) shall not be inconsistent with or breach any applicable law; and (iii) shall not be inconsistent with or breach any contract to which the Seller may be a party, in all cases so that any of the obligations assumed by the Seller under the Documents of Operation are negatively affected or limited in any way.
Section 4.4. Ownership of Assets; No Legal Actions in Relation to Assets. (a) With the exception of the Encumbrance listed in Annex 4.4 (a), the Seller has valid, full and exclusive ownership of and with respect to the Assets, free of any Encumbrances affecting their ownership and the right to freely dispose of them. If this Offer is accepted under its terms, on the Completion Date, the Buyer shall be the exclusive owner, with full, valid and irrevocable ownership of all Assets, free of Encumbrances affecting their ownership and the right to freely dispose of them (except for the Encumbrance listed in Annex 4.4 (a)).
(b) Attached hereto as Annex 4.4(b)(i) is the list of notarized deeds indicating the Sellers ownership of each of the Plants. The Seller has full ownership of each of the Plants and the Plants are free of any Encumbrances (except for the Encumbrance listed in Annex 4.4 (a). The Plants include all items planted, constructed and affixed within the respective premises, and the plan containing all the sections and constructions constituting the Plants attached hereto as Annex 4.4 (b) (ii).
(c) Except for the lists in Annex .4.4 (c), there are no pending actions, legal proceedings, procedures, disputes or governmental, administrative, arbitration or regulatory proceedings against the Seller or affecting the Seller, involving the Assets, and of which the Seller has been notified.
(d) The Assets are transferred in the conditions and at the places in which they are located as of the Completion Date, which are known and accepted by the Buyer. Therefore, the Seller makes no express or implied representation or warranty herein with regard to the conditions of preservation and operation of the Assets or their parts, or with respect to whether or not the Assets are appropriate for
the purposes for which they shall be used by the Buyer. The Buyer hereby waives its right to make any claims against the Seller in relation to any of these matters.
Section 4.5. Labor Matters. (a) Annex 2.2 (a) contains the complete list of the entire Personnel, indicating their seniority, salaries, bonuses, additional benefits and workplace (including the list of legal attachments in effect on employee salaries), which are known and hereby accepted by the Buyer, and which shall be updated by the Seller on the Completion Date. The Seller hereby state that, as of the Completion Date, there is no pending judicial or extrajudicial claim made by registered letter by Personnel members against the Seller by virtue of the their relationship of employment with the Seller, of which the Seller has been notified.
(b) The Seller hereby undertakes to hold the Buyer harmless from and against any Loss of the latter as a result of a Third-Party Claim exclusively resulting from:
(i) lack of truthfulness of the information contained in Annex 2.2 (a), and
(iii) non-compliance with any obligation and/or responsibility of the Seller to the Personnel caused prior to the Completion Date unless (1) the cause and/or non-compliance were known to the Buyer on the Completion Date or (2) they are in relation to workplace illnesses not legally claimed and reported to the Seller prior to the Completion Date,
both in (i) and (ii) pursuant to the procedure described in Section 13. With the exception of the above, the Buyer hereby waives its right to file any claims against the Seller in relation to compliance with labor, retirement, social security and safety and hygiene laws applicable in Argentina.
Any claim by the Buyer on the basis of this subsection (b) shall be duly reported to the Seller within a term of two (2) years as of the Completion Date. Any claim filed by the Buyer and reported to the Seller after such term shall not be valid and the Seller shall not be required to pay any compensation to the former.
Section 4.6. Permits and Authorizations; No Statement on Seller Activity. (a) Annex 4.6 contains the list of government licenses (whether they be federal, provincial or municipal), authorizations, registrations, certificates, permits and municipal authorizations and other authorizations and applications for permits and authorizations, in relation to the Assets and Sellers Activity (the Permits). The Seller hereby represents and warrants that such Permits are truthful and legitimate.
(b) Notwithstanding the foregoing provisions, the Seller makes no express or implied representations or warranties regarding the status of the Permits (except with regard to their truthfulness and legitimacy), or the sufficiency of the Permits in relation to the Assets or for performing the Sellers Activity; or with respect to the sufficiency of the Assets, Personnel and Assumed Contracts for performing the Sellers Activity; or, in general, regarding the conduct of the Sellers Activity by the Seller, or the Sellers business in relation to the Assets, including, but not limited to, sales volumes,
profit margins, etc.; therefore, the Buyer hereby waives its right to file any claims against the Seller with regard to any of these matters.
Section 4.7. Offered Brands; Offered Patent. The Offered Brands and Offered Patent have been duly registered with, presented to or requested from the trademark and patents authority or another authority, and such registrations, presentations and requests have been kept in effect and appropriately renewed. There is no Encumbrance or claim of which the Seller has been notified or any reported claim of any Person in relation to the Offered Brands and/or the Offered Patent, and the performance of the transactions mentioned in this Offer shall not alter or undermine such rights.
SECTION 5: Buyer Representations and Warranties
The Buyer hereby represents and warrants to the Seller that, on the Effective Date and on the Completion Date (with the exception of those that were made as of a specific date, in which case such representation and warranty must be true and correct as of such date):
Section 5.1. Incorporation: Legal Capacity. The Buyer is a corporation duly organized under Argentine Law and registered with the Superintendence of Corporations.
Section 5.2. Buyers Powers and Authorizations; Binding Agreement. (a) The Buyer has full powers and corporate authority to execute each of the Documents of the Operation to which it is a party, and to fulfill its obligations thereunder.
(b) Once the Offer is accepted under its terms, the Agreement and other Documents of the Operation shall constitute valid and binding obligations of the Buyer, which shall be enforceable under their terms.
Section 5.3. Approvals; No Conflict. (a) Once the Offer has been accepted under its terms, except as provided for in Section 6 and in Section 10, the signing, granting and fulfillment of the Buyers obligations under the Documents of Operation to which it is a party shall not require the prior or subsequent receipt of approvals or authorizations by Government Agencies or third parties.
(b) Assuming that the approvals provided for under Section 6 and Section 10 are obtained, the execution of the Documents of Operation to which it is a party, compliance with the Buyers obligations thereunder and the performance of the operations provided for therein: (i) shall not be inconsistent with or breach the Sellers documents of incorporation; (ii) shall not be inconsistent with or breach any applicable law; and (iii) shall not be inconsistent with or breach any contract to which the Buyer may be a party, in all cases so that any of the obligations assumed by the Buyer under the Documents of Operation are negatively affected or limited in any way.
Section 5.4. Information on Assets, Personnel and Assumed Contracts. (a) The Buyer hereby represents and acknowledges that it has had access to sufficient documentation and information on the Assets,
Personnel, Assumed Contracts, Offered Brands and Offered Patent in effect on the Effective Date, and that it inspected the Assets to its entire satisfaction, for the purpose of conducting an independent and complete analysis of them and determining the Price, including, but not limited to: (i) copy of the deed of each of the Plants; (ii) list of the Machinery, Vehicles and Other Registrable Personal Property, Offered Brands, Offered Patent and Other Assets; (iii) list of Personnel, indicating seniority, salaries, bonuses, additional benefits in effect on the Effective Date and workplace; (iv) copy and/or list of the terms and conditions of the Assumed Contracts; and (v) visit to the Plants and inspection of the Plants, Machinery, Vehicles and Other Registrable Personal Property and Other Assets, as applicable.
(b) The Buyer is aware of and accepts (i) the current status of the Assets; (ii) the terms and conditions of the relationship of employment with the Personnel in effect on the Effective Date; and (iii) the terms and conditions of the Assumed Contracts.
Section 5.5. Independent Analysis. The Buyer hereby represents that it has sufficient knowledge and experience to have conducted the analysis and independent evaluation as of the Effective Date of the Assets, Personnel, Assumed Contracts, Offered Brands, Offered Patent and Sale and Transfer, the results of which are its exclusive responsibility. The Buyers decision to make this Offer and to be subject to this Agreement and the other Documents of the Operation, and to perform the legal procedures provided for therein is exclusively based on its independent evaluation of the Agreement and the other Documents of the Operation and any other information it may have deemed convenient. In order to make this Offer and submit to this Agreement and the other referenced Documents of the Operation, the Buyer has not relied on any verbal or written information (except for that indicated herein, including the information contained in the Annexes to this Agreement) provided by the Seller or any of its Affiliates, officials, directors, employees, advisors, agents or representatives.
Section 5.6. Rejection of Warranties; No Recourse. The Buyer hereby acknowledges and agrees that (i) the sale and transfer of Assets is conducted in the state, condition, legal situation and place at which they are located, which are known and hereby accepted by the Buyer, without recourse against the Seller; and (ii) the Seller provides no other express or implied representation or warranty beyond those expressly provided in this Offer.
SECTION 6. Authorization of the CNDC [Argentine Committee for the Protection of Competition], the Brazilian Competition Authority and Foreign Competition Authorities
Section 6.1. Request for Authorization from the CNDC. The Buyer and Seller hereby undertake to provide the notice mentioned in Section 8 of Law No. 25,156 to the CNDC within the term established by law, submitting all documentation and information required for such purpose; and to respond to any comments or requirements made by the CNDC as soon as possible, but in any case, within the
terms established therein. Notwithstanding the joint subscription of the notice, the submission of Form F-1 and the pursuit and promotion of the administrative proceedings until a final resolution is obtained from the CNDC is the exclusive responsibility of the Buyer. The Seller hereby undertakes to collaborate to the greatest extent possible with the Buyer to obtain all the Seller information and documentation required for such presentation and to respond to such comments and requirements. The Buyer hereby undertakes to grant the Seller the right to supervise and participate in the process of submission and follow-up of the procedures with the CNDC and to review sufficiently in advance all the documentation and information to be submitted by the Buyer in relation to them. In addition, the Buyer hereby undertakes to keep the Seller informed of any kind of verbal and/or written communication with the CNDC for the purposes of obtaining the authorization of the Sale and Transfer.
Section 6.2. Conditions to or Rejection of Authorization by the CNDC. (a) Should the CNDC issue a final and unappealable resolution conditioning the authorization of the Sale and Transfer, the operations provided for in this Agreement shall remain fully valid and effective between the parties notwithstanding the fact that in order to meet such conditions the Buyer may be required to transfer part of its own assets or part of the Assets and/or Personnel or perform other actions.
(b) In the event that (i) the CNDC issues a final and unappealable resolution rejecting the Sale and Transfer authorization or (ii) the CNDC, or any other Government Agency or competent court, issues a final and unappealable resolution revoking such authorization, the transactions provided for in this Agreement shall remain fully valid and effective between the Parties, notwithstanding the fact that the Buyer may be required to transfer the Assets and/or Personnel to a third party or perform other actions in compliance with the requirements of the CNDC or the applicable Government Agency.
(c) In addition, the Buyer hereby undertakes to take, at any time, any steps required to prevent the CNDC from issuing any preliminary or permanent decision, resolution, measure, court or administrative order limiting or prohibiting the completion of the Sale and Transfer. Such steps to be taken by the Buyer include: (i) selling, assigning, granting independent operation and/or otherwise disposing of the assets and/or categories of assets or businesses of the Buyer and/or its Affiliates; (ii) rescinding, terminating business relationships between the Buyer and/or its Affiliates; (iii) spinning out, making any change or corporate or business restructuring of the Buyer and/or its Affiliates; (iv) disposing of an Affiliate or business; and/or (v) making any other change to the structure and/or business activity of the Buyer and/or its Affiliates, among others.
Section 6.3. Request for Authorization from the Brazilian Competition Authority. (a) The Buyer and Seller hereby also undertake to submit the request for authorization of the Sale and Transfer by the Brazilian Competition Authority within the term established by applicable law.
(b) The Buyer hereby states that as of the date of this document, the submission of the request for authorization of the Sale and Transfer by other Foreign Competition Authorities is not required.
(c) The Buyer and Seller hereby also undertake to make any request and/or notice and/or presentation of any kind required in relation to the authorization of the Sale and Transfer by the Brazilian Competition Authority within the term and in the manner established by the respective laws, submitting all documentation and information required for such purpose; and to respond to any comment or requirement made by the Brazilian Competition Authority as soon as possible, but in any case, within the terms established by the respective applicable laws. Notwithstanding the formal requirement of notification by the Buyer and the Seller, any presentation and the pursuit and promotion of the administrative procedure until a final resolution is obtained from the Brazilian Competition Authority is the exclusive responsibility of the Buyer. The Seller hereby undertakes to collaborate to the greatest extent possible with the Buyer to obtain all the Seller information and documentation required for such presentation and to respond to such comments and requirements. The Buyer hereby undertakes to grant to the Seller the right to supervise and participate in the process of submission and follow-up of the procedures and to review sufficiently in advance all the documentation and information to be submitted by the Buyer in relation to them. In addition, the Buyer hereby undertakes to keep the Seller informed of any kind of verbal and/or written communication with the Brazilian Competition Authority for the purposes of obtaining the authorization of the Sale and Transfer.
Section 6.4. Conditions to or Rejection of Authorization by the Brazilian Competition Authority. (a) Should the Brazilian Competition Authority issue a final and unappealable resolution conditioning the authorization of the Sale and Transfer, the operations provided for in this Agreement shall remain fully valid and effective between the parties notwithstanding the fact that in order to meet such conditions the Buyer may be required to transfer part of its own assets or part of the Assets and/or Personnel or perform other actions.
(b) Should the Brazilian Competition Authorities issue a final and unappealable resolution rejecting the Sale and Transfer authorization, the provisions of Section 3.3 (d) shall apply.
(c) In addition, the Buyer hereby undertakes to take at any time, any steps required to prevent the Brazilian Competition Authority from issuing any preliminary or permanent decision, resolution, measure, court or administrative order limiting or prohibiting the completion of the Sale and Transfer. Such steps to be taken by the Buyer include: (i) selling, assigning, granting independent operation and/or otherwise disposing of the assets and/or categories of assets or businesses of the Buyer and/or its Affiliates; (ii) rescinding, terminating business relationships between the Buyer and/or its Affiliates; (iii) spinning out, making any change or corporate or business restructuring of the Buyer and/or its
Affiliates; (iv) disposing of an Affiliate or business; and/or (v) making any other change to the structure and/or business activity of the Buyer and/or its Affiliates, among others.
Section 6.5. No Recourse. The Buyer hereby acknowledges and accepts that the receipt of all of the authorizations related to the Sale and Transfer by the CNDC and the Brazilian Competition Authority shall be at its sole risk, and it shall not be entitled to make any claims against the Seller in such regard.
SECTION 7: Environmental Matters
Section 7.1. Environmental Matters. (a) Pursuant to the procedure established in Section 13, the Seller shall hold the Buyer harmless from and against any environmental damage originating in the Plants prior to the Completion Date, provided that the Buyers claim is duly reported to the Seller within a term of five (5) years as of the Completion Date. Once such term has expired, the Buyer shall be fully and solely liable for any claim for such damages. The Buyer hereby undertakes to hold the Seller harmless from and against any environmental damage originating in the Plants as of the Completion Date, pursuant to the procedure established in Section 13.
(b) The Parties hereby agree that the scope of such compensation shall be exclusively the repair of such environmental damage and of the damages due to Third Party Claims. Should the Third Party Claim be made by an environmental authority, the Seller may exercise its defense in the manner deemed most convenient but hereby undertakes to act promptly and diligently in order to avoid the closure of the affected Plant.
SECTION 8. Transfer of Personnel
Section 8.1. Transfer of Personnel. As of the Completion Date, each Personnel member shall become an employee of the Buyer, under the terms established in Section 225 of the ECL. The Seller shall be responsible for all of the labor and social security obligations in relation to the Personnel enforceable until the Completion Date, inclusive. Subject to the provisions of Section 4.5, the Buyer shall be responsible for all of the labor and social security obligations in relation to the Personnel enforceable as of the Completion Date (exclusive) (regardless of whether such obligations have previously accrued or were caused prior to such date), and shall hold the Seller harmless from and against any claim that may be made as of the Completion Date, pursuant to the procedure established in Section 13.
Section 8.2. Seller Cooperation. The Seller shall cooperate with the Buyer in the provision of all information and, if applicable, the copies of all documentation related to the Personnel that are essential for implementing the transfer of Personnel.
SECTION 9: Transfer of Offered Brands; Offered License for Patent Use; Gratuitous Loan
Section 9.1. Transfer of Offered Brands. (a) Annex 9.1 (a) contains a list of brands duly registered in Argentina and/or abroad, owned by the Seller (the Sellers Offered Brands) or owned by Seller Affiliates (the Affiliates Offered Brands, and jointly with the Sellers Offered brands, the Offered Brands).
(b) If this Offer is accepted, on the Completion Date, the Seller undertakes to transfer to the Buyer the Sellers Offered Brands and to ensure the transfer to the Buyer of the Affiliates Offered Brands, by the delivery to the Buyer of offers for the transfer of brands subscribed by the Seller and/or the respective Seller Affiliates with signatures certified by a notary, for the prices indicated in Annex 9.1 (b) (i) and under the terms of the samples attached hereto as Annex 9.1 (b) (ii) (jointly, the Brand Transfer Offer). The Buyer hereby undertakes to accept the Brand Transfer Offer on the Completion Date.
(c) Except as provided for in Section 9.1 (b) in relation to the Offered Brands, the Sale and Transfer shall under no circumstances include or involve the total or partial assignment to the Buyer of the ownership or use of brands owned by the Seller or its Affiliates.
(d) The Buyer hereby expressly undertakes not to use the name Cargill for any purpose. In addition, it undertakes to disassemble and remove, at its sole cost and expense, all signs existing in the Plants and/or any other Asset referring to any brand (other than an Offered Brand) owned by the Seller and its Affiliates, including Cargill, within a term of sixty (60) Business Days as of the Completion Date.
Section 9.2. License for Use of Offered Patent. (a) Annex 9.2 contains a copy of the patent owned by the Seller that shall be licensed to the Buyer for the Argentine territory (the Offered Patent).
(b) If this Offer is accepted, the Seller undertakes to license the use of the Offered Patent to the Buyer as of the Completion Date, by the delivery to the Buyer of an offer of a license for patent use subscribed by the Seller with its signature certified by a notary, for the price of fifty thousand Dollars (US$ 50,000) and under the terms of the sample attached hereto as Annex 9.2 (the Offer of License for Patent Use). The Buyer hereby undertakes to accept the Offer of License for Patent Use on the Completion Date.
Section 9.3. Gratuitous Loan. If this Offer is accepted, on the Completion Date, the Buyer undertakes to lend the following items to the Seller free of charge: (i) certain offices and furniture located in the Plants of the city of Rosario, Province of Santa Fe, and of the city of Pilar, Province of Buenos Aires, and (ii) the facilities of the building located in the district of Rufino, Province of Santa Fe, described in Annex 9.3, by the delivery to the Seller of a gratuitous loan offer subscribed by the Buyer under the terms and conditions of the samples attached hereto as Annex 9.3 (the Gratuitous Loan Offer). The Seller shall accept the Gratuitous Loan Offer on the Completion Date.
Section 9.4. Transfer of Offered Software. If this Offer is accepted, on the Completion Date, the Seller undertakes to transfer to the Buyer the Offered Software listed in Annex 9.4, for the price of twenty
thousand Dollars (US$ 20,000) and under the terms of the sample attached hereto as Annex 9.4 (the Software Transfer Offer). The Buyer hereby undertakes to accept the Software Transfer Offer on the Completion Date.
SECTION 10: Transfer of Assumed Contracts
Section 10.1. Assumed Contracts. (a) On the Completion Date, the Buyer shall assume the contractual position of the Seller in the Assumed Contracts. For such purpose, by the Completion Date, the Seller and the Buyer shall use their best efforts to have the respective counterparties to the Assumed Contracts consent to the assignment of the Sellers contractual position to the Buyer. If necessary, the Seller shall notify the counterparty under the terms of the samples attached hereto as Annex 10.1. Notwithstanding the foregoing provisions, the buyer hereby accepts (i) that the foregoing obligation is to use its best efforts and that it shall make no claim against the Seller if such consents are not obtained, and (ii) that if such consent is not obtained with respect to any of the Assumed Contracts, such circumstance shall not prevent the completion of the Sale and Transfer, and the Buyer undertakes, in such circumstances, to provide any reasonable collaboration that may be required by the Seller so that the Seller may meet its obligations under such contracts until their expiration.
(b) As of the Completion Date, the Buyer shall be solely responsible for meeting all the obligations under the Assumed Contracts that are enforceable as of the Completion Date, and it shall exclusively bear all costs, expenses, fees, rates, taxes, penalties and any other expenditure in relation to the Assumed Contracts that are enforceable as of the Completion Date.
(c) The Buyer hereby undertakes to hold the Seller harmless from and against any claims that may arise as of the Completion Date (whether they are made by the counterparties to the Assumed Contracts or by third parties in relation to the Assumed Contracts) provided that the cause of the claim occurs after the Completion Date, according to the procedure established in Section 13.
(d) (i) With regard to the Assumed Contracts with Clients the Seller hereby undertakes to hold the Buyer harmless from and against any claim that may arise as of the Completion Date (whether they are made by the counterparties to the Assumed Contracts with Clients or by third parties in relation to the Assumed Contracts with Clients), provided that the cause of the claim occurs prior to the Completion Date, inclusive, pursuant to the procedure established in Section 13. (ii) With regard to the Assumed Contracts with Suppliers, the Seller hereby undertakes to hold the Buyer harmless from and against any claim by the counterparties to the Assumed Contracts with Suppliers that may arise as of the Completion Date, provided that the Cause of the claim occurs prior to the Completion Date and is solely based on non-compliance by the Seller with its payment obligations for the provision of the respective goods and services, pursuant to the procedure established in Section 13.
(e) The Seller shall be solely responsible for meeting any obligation under any other contractual relationship, whether written or verbal, usual or unusual, with third-party suppliers providing services in relation to the Assets and that is not included in the list of Assumed Contracts of Annex 2.3, and shall hold the Buyer harmless from and against any claim that may arise as of the Completion Date under such contractual relationship (whether its cause occurs prior to or after the Completion Date), pursuant to the procedure established in Section 13.
(f) With regard to the Assumed Contracts with Clients indicated Annex 10.1 (f), under which the Seller has contractually pre-established a price for flour of which the delivery may remain pending as of the Completion Date, the Seller hereby undertakes to provide the amount and quality of wheat required for its production by such date. The amount to be paid by the Buyer for the abovementioned wheat shall be the amount resulting from deducting from the wheat sale price the variable expenses and taxes required for its production and transportation (which shall be calculated as usually calculated by the Seller) plus an amount of sixty-five (65) dollars per Tn.
(g) With regard to the Assumed Contract with Clients indicated in Annex 10.1 (g) under which the Seller has received monetary advances for goods pending delivery, the Seller must transfer to the Buyer for each ton of Product pending delivery as of the Completion Date, the amount and quality of wheat required to produce the goods. In addition, it must transfer the amount of money required to cover variable expenses and taxes, plus an amount of twenty-five (25) dollars per Tn.
(h) The Buyer hereby undertakes to comply with all the orders made by clients and accepted by the Seller pending compliance as of the Completion Date, up to a maximum of one week of sales, based on the average of the ten (10) preceding weeks.
(i) Should there be any other contracts with clients under which delivery of goods remains pending as of the Completion Date due to client delays in collecting the goods, the Parties shall establish by mutual agreement the way in which such contracts shall be transferred to the Buyer.
SECTION 11. Technical Support Service
Section 11.1. Technical Support Service. The Seller shall provide to the Buyer, if so required by the latter on the Completion Date, technical consulting services to provide training, support and assistance in the implementation, comprehension and operation of the computer systems and administrative processes regarding the Sale and Transfer, pursuant to the guidelines of this Section 11.1 (the Technical Support Service).
(b) The scope and term (the Service Term) of the Technical Support Service shall be established by mutual agreement on the Completion Date, subject to the Sellers possibilities of providing the Service (as established in its policies and subject to its contractual limitations with suppliers). In addition, the
respective consideration shall be determined in the same way in which the cost of such services is internally allocated by the Seller among its functions and business units, plus applicable taxes.
(c) For the purposes of providing the Technical Support Services, during the Service Term, the Seller shall reasonably collaborate with the Buyer and shall provide the professional resources and materials reasonably necessary for the Buyer to progress in the comprehension and operation of the computer systems and the administrative processes regarding the Sale and Transfer and continue the Sellers activity as of the Completion Date, in accordance with the quality standards of the Sellers computer area on the Completion Date. The Buyer hereby acknowledges and accepts (i) that the Seller does not regularly provide this kind of technical support services and shall only do so to collaborate with the Buyer, (ii) that the obligation of any performance of tasks as part of the Technical Support Service shall be only to use its best efforts according to the Sellers quality standards and (iii) that the amount of any claim against the Seller for any reason in relation to the Technical Support Service may not exceed the amount effectively paid by the Buyer to the Seller as consideration for the Technical Support Service during the Service Term pursuant to Section 11.1.
SECTION 12: Transfer of Inventories of Raw Materials and Products
Section 12.1. Sale and Transfer of Inventories. (a) The Seller hereby undertakes to maintain sufficient Inventories, from the Effective Date to the Completion Date, to ensure the usual and ordinary course of business of the Sellers Activity.
(b) On the Completion Date, the Seller shall sell and transfer to the Buyer, and the Buyer shall purchase and receive from the Seller, as is and in agreement, the wheat, input, packaging material (including auxiliary packaging materials), spare parts and finished products and by-products related to the Sellers Activity and that are owned by the Seller (the Inventories), according to the attached list and pursuant to the procedure indicated in Annex 12.1.
Section 12.2. Price of Inventories. (a) As sole consideration for the sale and transfer of Inventories, the amount of Pesos determined as the price of the Inventories (the Price of Inventories) according to the procedure indicated in Annex 12.1 shall be paid, in addition to the Value Added Tax, as applicable.
(b) The Price of Inventories shall be paid in Pesos on the Completion Date, by transfer to be performed by the Buyer to the account indicated by the Seller. For such purpose, the part of the Price of Inventories valued in Dollars shall be converted to Pesos at the exchange rate used by the Banco de la Nación Argentina for its dollar bill sale operations on closing its operations on the Business Day immediately preceding the effective payment date.
SECTION 13: Indemnity
Section 13.1. Sellers Obligation of Indemnification. If this Offer is accepted under its terms, and notwithstanding the existence of other indemnities contained herein, the Seller must defend, indemnify and hold the Buyer and its shareholders, controlling parties, directors, officials and/or employees harmless from and against any Losses they may experience, which have been or may be caused by or result or originate from:
(a) the inaccuracy or omission of any representation or violation of any warranty provided by the Seller in this Offer; and/or
(b) non-compliance by the Seller with any of the commitments, agreements or obligations arising from this Offer; and/or
(c) any judicial or extrajudicial claim against the Buyer in relation to the Sale and Transfer resulting from an act, action or omission of the Seller caused or originating prior to the Completion Date, with the exception of any judicial or extrajudicial claim against the Buyer in relation to the matters mentioned in Section 4.4 (d), Section 4.5 (b), Section 4.6 (b), Section 6, Section 7.1, Section 8.1 (a) and Section 10.1 (d) (ii), with respect to which the Sellers obligation to provide compensation shall be exclusively governed by the express provisions of such Sections.
Section 13.2. Buyers Obligation of Indemnification. If this Offer is accepted under its terms, and notwithstanding the existence of other indemnities contained herein, the Buyer must defend, indemnify and hold the Seller and its shareholders, controlling parties, directors, officials and/or employees harmless from and against any Losses they may experience, which have been or may be caused by or result or originate from:
(a) the inaccuracy or omission of any representation or violation of any warranty provided by the Buyer in this Offer; and/or
(b) non-compliance by the Buyer with any of the commitments, agreements or obligations arising from this Offer; and/or
(c) any judicial or extrajudicial claim against the Seller in relation to the Sale and Transfer resulting from an act, action or omission of the Buyer caused or originating after the Completion Date; and/or
(d) any judicial or extrajudicial claim against the Seller in relation to the Sale and Transfer resulting from an act, action or omission caused or originating prior to the Completion Date, in relation to the labor matters mentioned in Sections 4.5 (b) and 8.1 (a), the environmental matters mentioned in Section 7.1, and the matters related to Assumed Contracts with Suppliers mentioned in Section 10.1 (d) (ii), provided that the Seller has not assumed a specific obligation to indemnify the Buyer in relation to such matters pursuant to and according to the scope expressly established in such Sections.
Section 13.3. Effective Term. If this Offer is accepted, the Seller and Buyers obligations of indemnification shall survive the completion of the operations provided for under this Offer and shall
remain in effect for the term indicated in the respective statute of limitations according to the nature of each obligation (the Indemnity Period), unless a shorter term is specified in any Section of this Offer.
Section 13.4. Claim Procedure. If this Offer is accepted under its terms, any party entitled to indemnification under it (an Indemnitee) (i) must notify the party responsible for the indemnification (the Indemnitor) as soon as possible, but under no circumstances after a term of five (5) calendar days as of the date on which it becomes aware of the facts on which the respective claim is based (or a shorter term if required to respond to the claim within a sufficient time period); (ii) must provide to the Indemnitor all the information and documentation required to establish and verify any Loss that the Indemnitee has determined as the cause of the claim for which indemnification may be provided (a Claim); and (iii) must allow access by the Indemnitor to the records in possession or under the control of the Indemnitee that are reasonably related to the Claim. Notwithstanding the above, any failure to provide notice or delay in providing notice to the Indemnitor shall not release the Indemnitor from any liability it may have to the Indemnitee, unless the Indemnitor proves that it has experienced significant damage as a result of the failure or delay in providing notice.
Section 13.5. Third-party Claim Procedure. If this Offer is accepted under its terms and if the Indemnitor must indemnify the Indemnitee for a claim filed by a third party, the indemnification shall be provided according to the following procedure:
(a) Once a notice regarding actions filed by a third party is received by the Indemnitee, or once such Indemnitee becomes aware, by means of a notice provided in writing or by an electronic medium (including, but not limited to e-mail, letter, fax, etc.) of a third-party claim subject to indemnification under this Offer (the Third-Party Claim) and, if the Indemnitee files a claim against the Indemnitor by virtue of this Section 13, the Indemnitee shall notify the Indemnitor of the filing of the Third-Party Claim as soon as possible, but no later than ten (10) calendar days after being notified of the initiation of the proceedings (or a shorter period that may be required to answer the claim within a sufficient time period) (the Notice of Claim). However, failure to provide notice or a delay in providing notice to the Indemnitor shall not release the Indemnitor from any liability to the Indemnitee, except to the extent to which the Indemnitor proves that the failure to provide notice or delay in providing notice has been substantially detrimental to the defense of the Third-Party claim.
(b) If a Third-Party Claim is filed against an Indemnitee, and such Indemnitee notifies the Indemnitor of the Notice of Claim, the Indemnitor shall be entitled, to the extent allowed by applicable law, to participate in the Third-Party Claim and may, insofar as it wishes to do so, assume the defense in the proceedings initiated by virtue of the Third-Party Claim, bearing the costs and expenses and designating for such purpose attorneys that are reasonably satisfactory to the Indemnitee. To that end,
within five (5) Business Days following the receipt of the Notice of Claim, the Indemnitor must notify the Indemnitee of its decision to assume and control the defense of the Third-Party Claim (the Notice of Assumption of Defense). In such case, the Indemnitor shall not be liable to the Indemnitee under this Section 13 for the fees of other attorneys or for other expenses related to the defense of the Third-Party Claim incurred after such notice by the Indemnitee in relation to the defense of such Third-Party Claim. However, the Indemnitor shall be liable for the fees of attorneys designated by the Indemnitee if the defendants of such claim are both the Indemitee and the Indemnitor and the Indemnitee has a different or additional legal defense to that of the Indemnitor. Notwithstanding the foregoing provisions, the Indemnitee shall always be entitled, although not required, to participate, at its own cost, in the defense against the Third-Party claim with attorneys of its choice, but the Indemnitor shall be authorized to control the defense if it has sent the Notice of Assumption of Defense, unless the Indemnitee has fully and unconditionally released the Indemnitor from any liability in relation to that matter in particular.
(c) The Indemnitor may only compromise or reach a settlement regarding the Third-Party Claim with the prior consent of the Indemitee (and this consent may not be unreasonably denied), and the Indemnitor (i) shall pay or seek the payment of all the amounts resulting from such agreement or judgment on the effective date of such settlement, (ii) shall not encumber any of the assets of the Indemnitee or accept any restriction or condition that may be applied to or negatively and significantly affect the Indemnitee o the Indemnitees business, and (iii) shall obtain, as a condition of the settlement or any other resolution, a complete release of the Indemnitee from any liability with respect to the Third-party Claim. In order to avoid any doubt, the Indemnitee shall be entitled to oppose any settlement that may involve an express or tacit acknowledgment of certain facts or circumstances that may affect the brands or image of the Indemnitee and/or affect its business.
(d) Should the Indemnitor fail to send the Notice of Assumption of Defense within the established term or, if after providing such notice, it fails to defend, answer or otherwise obtain protection against such Third-Party Claim within the legally established term, the Indemnitee shall be entitled to defend, answer or otherwise protect itself from the Third-Party Claim with the legal counsel of its choice, and to negotiate or execute agreements regarding such claim, and shall also be entitled to request from the Indemnitor the reimbursement of all legal costs, including all reasonable attorneys fees, expenditures and all amounts paid as a result of such claim or judgment or its negotiation or settlement obtained.
(e) The Indemnitee shall cooperate, assist and seek the assistance that the Indemnitor may reasonably require in relation to the defense of the Third-Party Claim and to obtain from third parties the
reimbursement of any amount paid by the Indemnitor or that the Indemnitor may be required to pay as indemnification hereunder.
Section 13.6. Payments. If this Offer is accepted and provided that a claim for which indemnification may be provided hereunder has been definitively resolved, the amount of the Loss shall be entirely paid by the Indemnitor to the Indemnitee with immediately available funds, within five (5) Business Days as of the date on which the payment is claimed by the Indemnitee. Any claim, the liability and amount of the related Losses shall be deemed definitively resolved for the purposes of this Section 13.6 when determined by mutual agreement of the parties to such claim or, in the event of a dispute, when a final judgment is issued regarding the amount of the corresponding Loss and the liability of the Indemnitor. In the event of failure to pay the Loss within the abovementioned period, the owed amount shall accrue an annual interest at the active rate used by the Banco de la Nación Argentina for its 30-day discount transactions, as of the third day following the date of delay until the date of effective payment, notwithstanding any other right that the Indemnitee may have.
Section 13.7. Damage Mitigation. Any Indemnitee must take the necessary steps to protect its situation with respect to any matter that may be subject to indemnification under this Section 13, in the same way as it would if it were not entitled to receive any kind of indemnification.
SECTION 14: General Provisions
Section 14.1. Confidentiality. The Parties must abstain from disclosing on their own or through their Affiliates, managers or employees, any information received from the other Party as a result of the Offer and Agreement, as well as the Price and other conditions of the Agreement (the Confidential Information) without the prior written authorization of the other Party. This obligation shall remain in effect for 3 (three) years as of the Completion Date, or the date as of which such Confidential Information is made available to the other Party, whichever occurs later. Any Confidential Information that the Parties may be required to disclose by law is expressly excluded from this prohibition. In the event of non-compliance with this provision, the non-complying Party shall provide compensation to the other Party for any damages caused. Any Confidential Information received by the Parties shall be exclusively used to comply with the provisions of the Agreement and its use for any other purpose is hereby expressly forbidden. Once the use or purpose for which the Confidential Information was made available to the other party has ended, each Party shall immediately return to the other Party any Confidential Information received, in addition to all copies thereof.
Section 14.2. Non-Competition within the Territory. (a) The Seller shall not participate or allow any of its Affiliates to participate, for a period of 5 (five) years after the Completion Date (either as an owner,
operator, manager, consultant or otherwise) in any part of the Territory in any business related to wheat milling and/or the production and/or marketing of flour and wheat milling by-products.
(b) The Seller hereby agrees that the scope of the restrictive provisions established in this Section 14.2 is reasonable with respect to purpose, time and scope. Should any court determine that the purpose, duration and/or geographical scope is unreasonable and that the provision as such is inapplicable, the provision shall remain in full force and effect with the most extensive purpose, duration and/or geographical scope possible that does not render it unenforceable.
Section 14.3. Entire Agreement. Once this Offer is accepted by the Seller under its terms, this Offer and the other Documents of the Operation (once issued and subscribed), in addition to the annexes and appendixes attached hereto and to such documents, contain a full statement of all the terms and agreements between the Parties and of such documents, with respect to the matters included herein and in such documents, and shall supersede any prior agreement and understanding between the Parties with respect to such matters. In the event of a discrepancy between the terms of any of the Documents of Operation and this Offer, the provisions of this Offer shall prevail.
Section 14.4. Amendments and Waivers. (a) The provisions of the Agreement may only be amended, reformed or waived with the written consent of the Parties.
(b) No delay or failure by any of the Parties to exercise a right or recourse or to demand compliance with a condition under the Offer shall result in a waiver of any such rights, recourses or conditions, nor shall it limit their exercise. The individual or partial exercise of such right, recourse or condition shall not prevent the exercise or subsequent exercise of any other right, recourse or condition. The waiver of one of the parties rights under the Agreement shall only be valid if it was granted in writing by such party, and shall not be interpreted as a waiver of any other right hereunder.
Section 14.5. Applicable Law and Jurisdiction. (a) Once the Offer is accepted by the Seller, the Agreement shall be governed and interpreted pursuant to Argentine law.
(b) Any dispute or disagreement regarding the interpretation and/or application of this Agreement shall be submitted to the ordinary Commercial Courts of the city of Buenos Aires and the Parties hereby waive any other jurisdiction.
Section 14.6. Expenses. (a) With the exceptions indicated in the Agreement, each of the Parties shall bear its own costs and expenses related to the negotiation, performance and implementation of the Documents of the Operation and the transactions provided for therein, including all those related to the execution and implementation of the Agreement.
(b) All expenses related to the implementation of the transfer of the Plant deeds (including the costs of the notary involved in issuing the Deeds that must be approved by both Parties) and other Assets shall be borne in equal parts by the Seller and the Buyer.
(c) All expenses related to the preparation, presentation and follow-up of the request for authorization of the Sale and Transfer by the CNDC and the Brazilian Competition Authority shall be exclusively borne by the Buyer, with the exception of the legal advisors feels, which shall be borne by each Party.
Section 14.7. Notices. Unless otherwise indicated herein, all notices, notifications and other communications under the Agreement shall be made in writing and delivered by hand or private 24-hour postal service or by fax, to the address or number specified herein for the respective addressee (or to another address or number designated by the addressee by written notice to the other Party pursuant to this Section 14.7):
For the Seller, to:
Cargill S.A.C.I.
Av. Leandro N. Alem 928, piso 2, city of Buenos Aires,
Argentine Republic
Attn: Departamento de Legales
Fax: 54-11-4317 7000
For the Buyer, to:
Molino Cañuelas SA.C.I.F.I.A.
Av. De Mayo No. 560, Piso 1°,
Ciudad Autónoma de Buenos Aires,
Argentine Republic
Attn: Departamento de Legales
Fax: 54-11-4331 2890
All notices shall be valid upon their receipt. Notices sent by fax must be immediately confirmed by written notice delivered by hand or post, as established in this Section 14.7. For further clarification, notices hereunder must not be sent by e-mail.
Section 14.8. Severability. If it is determined that any of the provisions of the Agreement is unlawful or unenforceable in any jurisdiction, such provision shall not be valid with respect to such jurisdiction to the extent of its unlawfulness or unenforceability in such jurisdiction and such circumstance shall not affect the validity or enforceability of any other provision of the Agreement in such jurisdiction or the validity or enforceability of any provision of the Agreement in any other jurisdiction. If any provision of the Agreement is invalid under this Section 14.8, the Parties shall negotiate and cooperate in good faith to replace it with a valid provision with similar or equal economic and legal results to those that would have been produced by such provision, to the extent possible.
Section 14.9. Successors and Assigns; Third Parties; Prohibition of Assignment. Except as established in the Agreement:
(a) the Agreement shall inure to the benefit of the permitted successors or assigns of either of the Parties;
(b) none of the provisions of the Agreement shall create or be interpreted as creating third-party beneficiary rights with respect to any person that is not a party to the Agreement; and
(c) the Parties may not assign the Agreement or the rights or obligations hereunder without the prior written consent of the other party hereto and any supposed assignment without the required consent shall be null and void, unless express written consent is provided by the other Party.
[stamp:] ANA VICTO [illegible]. TRANSLATOR.
[There are two partially-legible stamps on all of the pages of the original document.]
ASSOCIATION OF NOTARIES. CITY OF BUENOS AIRES. FEDERAL CAPITAL. ARGENTINE REPUBLIC [logo]
CERTIFICATE OF SIGNATURE AUTHENTICATION. LAW 404. [emblem]
F 012734724
Buenos Aires, June 22, 2016. In my capacity as acting notary of Notarial Registry No. 374 of the city of Buenos Aires, I HEREBY CERTIFY: that the signature appearing on the document attached to this page, of which the authentication requirement is simultaneously met by NOTARIAL DOCUMENT number 14 of BOOK number 138, was placed before me by the person/s whose identification documents and documents providing proof of identity are indicated below: Carlos Adriano NAVILLI, holder of Documento Nacional de Identidad 12,657,137, who provided proof of his identity with the abovementioned document, of which the photocopies of the relevant parts were filed, who is duly authorized for these proceedings. Such person acts on behalf, in representation and in his capacity as Proxy of MOLINO CAÑUELAS S.A.C.I.F.I.A., pursuant to: a) a Full General Power of Attorney dated July 6, 2015, notarized document No. 238, recorded on page 488, of Notarial Registry No. 1951 of the city of Buenos Aires, and b) Special Minutes of a Board of Directors Meeting for these proceedings, dated June 15, 2016. I have had the certified copies of such documentation before me for these proceedings. This authentication is provided simultaneously on Page F012734724 and Annex F002730684.
[illegible signature and stamp]
[The following information appears on the back of the certificate:]
[bar code]
06/24/2016 2:34:46 p.m.
F 012734724
[There are two partially-legible stamps on the right-hand margin of the page:]
ANA [illegible] TRANSLATOR
MINISTRY [illegible] UNIT OF COORDINATION [illegible] [emblem]
ASSOCIATION OF NOTARIES. CITY OF BUENOS AIRES. FEDERAL CAPITAL. ARGENTINE REPUBLIC [logo]
LEGALIZATION. LAW 404. [emblem]
[QR Code]
L 013316336
THE ASSOCIATION OF NOTARIES of the city of Buenos Aires, Federal Capital of the Argentine Republic, by virtue of the powers granted to it by the applicable organic law, HEREBY LEGALIZES the signature and stamp of notary ALFONSO GUTIERREZ ZALDIVAR appearing on the attached document, submitted on this date under No. 160624264521/8. This legalization makes no judgment as to the content or form of the document.
Buenos Aires, Friday, [illegible] 24, 2016.
[illegible signature]
NOTARY ALBA [illegible] DE LEON. ASSOCIATION OF NOTARIES. LEGALIZATION OFFICER.
[stamp:] ASSOCIATION OF NOTARIES. CITY OF BUENOS AIRES. FEDERAL CAPITAL. ARGENTINE REPUBLIC [emblem] LEGALIZATION
[stamp:] ANA VITO [illegible]. TRANSLATOR
[The following information appears on the left-hand margin of the original document:]
[stamp:] FEDERAL COUNCIL OF ARGENTINE NOTARIES
[QR Code]
[The following information appears on the back of the document:]
ANA VICTORIA [illegible]
MINISTRY [illegible] UNIT OF COORDINATION [illegible] [emblem]
SERIES A 5924003
[emblem]
ARGENTINE REPUBLIC. MINISTRY OF FOREIGN RELATIONS AND WORSHIP
General Department of Consular Affairs. Unit of Coordination of Legalizations
AUTHORIZED
The Unit of Coordination of Legalizations of the Ministry of Foreign Relations and Worship hereby certifies that the signature appearing on this document: SIGNATURE AUTHENTICATION and states ALBA ROSA MUÑIZ DE LEON is similar to the one that appears in its records.
Document Holder: MOLINO CAÑUELAS S.A.C.I.F.I.A.
Order No.: 131701/2016
Fee: 7.9.5
Amount: 0
Date: 06/28/2016
Signature: [illegible signature and stamp:] Gustavo A. BELLUOMINI. Unit of Coordination of Legalizations. Ministry of Foreign Relations and Worship
[bar code:] 2016131701
[bar code:] 44DC8F86B1ACF195807E9BA29DC1CCEC
[The following information appears on the back of the document:]
[There is a partially-legible stamp:] TRANSLATOR
I DO HEREBY CERTIFY THAT THE FOREGOING IS, TO THE BEST OF MY KNOWLEDGE, A TRUE AND ACCURATE TRANSLATION INTO ENGLISH (34 PAGES) OF THE DOCUMENT WRITTEN IN SPANISH ATTACHED HERETO AND TO WHICH I REFER. IN WITNESS THEREOF I SIGN AND SEAL THIS DOCUMENT IN THE CITY OF BUENOS AIRES, ARGENTINA, ON THE 4th DAY OF THE MONTH OF MAY OF 2017.
POR EL PRESENTE CERTIFICO Y DOY FE QUE LA QUE ANTECEDE ES A MI MEJOR SABER Y ENTENDER, UNA TRADUCCIÓN FIEL AL INGLÉS (34 PÁGINAS) DEL DOCUMENTO ADJUNTO REDACTADO EN ESPAÑOL, QUE HE TENIDO A LA VISTA Y AL CUAL ME REMITO. Y PARA QUE CONSTE, FIRMO Y SELLO EN LA CIUDAD AUTÓNOMA DE BUENOS AIRES, ARGENTINA, A LOS 4 DÍAS DEL MES DE MAYO DE 2017.
Exhibit 10.4
TRADUCCIÓN PÚBLICA
[El documentoesun original queconsta de 52páginas.]
Buenos Aires, December 15, 2015
MOLINO CAÑUELAS S.A.C.I.F.I.A.
Kennedy N° 160, Cañuelas
Province of Buenos Aires
Argentine Republic
Re: Proposal for Transfer of Stock-in-Trade
Dear Sirs,
As President of MOLCA S.A. (hereinafter referred to as MOLCA, I would like to submit for the consideration of MOLINO CAÑUELAS S.A.C.I.F.IA. (hereinafter referred to as MC and jointly with MOLCA, the Parties and either of them, individually, as the Party) the following proposal (hereinafter referred to as the Proposal), containing the terms and conditions for the transfer of stock-in-trade consisting of the operation of the Port Terminal and Multi-logistics Center business in the property located at Ruta 9 Km 95.5, in the district of Zárate, in the Las Palmas area, called Las Palmas Terminal (hereinafter referred to as the Port).
Continuing our conversations, we would like to submit for your consideration this Proposal, which shall be effective for a term of 30 (thirty) calendar days as of the date of its receipt by MC (hereinafter referred to as the Acceptance Term).
If this Proposal is not duly accepted by MC within the Acceptance Term, it shall automatically cease to be effective and valid. Therefore, this Proposal shall only be deemed accepted if MC submits its acceptance to MOLCA by the delivery of a written letter within the Acceptance Term, in which case, this Proposal shall be governed by the terms and conditions indicated below.
Based on the above provisions, MOLCA wishes to submit for your consideration the following terms and conditions (hereinafter referred to as Terms and Conditions of the Proposal, which shall become effective and shall be deemed valid, binding, mandatory and for the benefit of both Parties if this Proposal is accepted by MC:FALTA LA FIRMA
TERMS AND CONDITIONS OF THE PROPOSAL
SECTION I
PURPOSE
Section 1.Transfer of Stock-in-Trade. Subject to the acceptance of this Proposal, MOLCA shall sell to MC and the latter shall accept and purchase the stock-in-trade composed of the assets indicated below for the operation of the Porter Terminal and Multi-logistics Center business at the Port (hereinafter referred to as the Stock-in-Trade).
Section 1.2.Transfer of Assets Included in the Stock-in-Trade. Subject to the acceptance of the Proposal, MOLCA undertakes to transfer to MC the following assets:
1.2.1. It shall transfer to MC all of the property, plant and equipment of the Stock-in-Trade according to the list attached hereto as Annex I (hereinafter referred to as the Property, Plant and Equipment). The Parties hereby represent that part of the Stock-in-Trade listed in Annex I was invoiced prior to this Proposal, under Invoices No. 314, 315, 316, 317, 318 and 319, the payment of which remains pending and, therefore, such operations have also been included in this Proposal, as they are part of the Stock-in-Trade assets.
The possession of the transferred Property, Plant and Equipment shall become effective upon execution of the Port lease agreement, pursuant to SECTION III of this Proposal. Within a term of 60 (sixty) calendar days after such date, MOLCA shall perform all of the required procedures to transfer ownership of each part of the property to MC.
1.2.2. It shall sell and transfer to MC all of the spare parts of the Stock-in-Trade indicated in the list attached hereto as Annex II (hereinafter referred to as the Spare Parts).
The possession of the transferred Spare Parts shall become effective upon execution of the Port lease agreement, pursuant to SECTION III of this Proposal.
FALTA TEXTO (PÁGINA 2 DEL PDF MARCADA)
The possession of the transferred Property, Plant and Equipment shall become effective once the contract has been executed at the location of the Port pursuant to SECTION III of this Proposal.
1.2.3. It shall assign, sell and transfer the ownership of the real estate, including everything planted and constructed, as indicated on the list attached hereto as Annex III, identified as a fraction of the rural plot of approximately 7.4 Has (18.3 acres), located at the urban border of the Villa Reducción district, Reducción Division, Juárez Celman Department, in the Province of Córdoba, composed of 12 (twelve) plots comprising a total surface of 73,856.71 m2, which it owns under a sale and purchase agreement proposal dated September 16, 2013 (hereinafter the Reducción Plant).
The possession of the Reducción plant shall become effective upon execution of the Port lease agreement under SECTION III of this Proposal. MOLCA shall, within a term of 60 (sixty) calendar days after such date, perform all of the procedures required for MC to issue the respective deed transferring ownership.
1.2.4. It shall assign and transfer the credit pending collection from MARITIMA MARUBA, pursuant to the list of installments to be made, attached hereto as Annex IV (hereinafter referred to as the MARITIMA ARUBA Credit.)
1.2.5. It shall assign and transfer the rights and benefits resulting from the insurance policies in effect purchased and paid by MOLCA, which shall expire after this Proposal, pursuant to the list attached hereto as Annex V (hereinafter referred to as the Insurance Policies).
SECTION II
PERSONNEL
Section 2.1.Transfer of Personnel. Subject to the approval of this Proposal, MOLCA shall assign to MC, under the terms of Section 227 of the Law on Employment Contracts, the relationships of employment of the employees working at the Port, as indicated in Annex VI of this Proposal. MC shall respect the categories, remunerations and other labor conditions currently in effect.
Section 2.2.: Effectiveness of Assignment. The assignment established by mutual agreement hereunder shall become effective on January 1, 2016. Within the following 72 (seventy-two) hours, the Parties shall execute the respective assignment contacts with each of the employees subject to this assignment, for which purpose they shall use the agreement template attached hereto as Annex VII.
Section 2.3.Obligations with Ongoing Accrual: The Parties hereby agree that the obligations with ongoing accrual as of the date of transfer of the relationships from one party to the other (including the partially-accrued non-monthly payment obligations that are not due as of such date, such as vacations and additional annual wages), shall be paid by MOLCA in proportion to the days elapsing until their due dates with their respective proportional social security charges.
SECTION III
PORT LEASE
Section 3.1.: Obligation to Lease the Port: In order for MC to operate the Stock-in-Trade it shall purchase, MOLCA undertakes to lease to it the Port with an option to purchase in favor of MC, the terms and conditions of which shall be established by mutual agreement in due time. The respective agreement must be executed within a term of 30 calendar days.
Section 3.2.: Commercial Aspects of the Lease Agreement: Notwithstanding the fact that all of the commercial aspects shall be included in the respective lease agreement, the Parties would like to establish the following aspects that have already been agreed, which must be included in the lease agreement: 1) Its effective term may not be less than 20 (twenty) years, and MC shall have the option to renew the agreement at least for 10 (ten) additional years; 2) The rent amount shall be One Million, Five Hundred Thousand US Dollars (US$ 1,500,000) for one year; 3) MC shall have an option to
purchase the Port and such option may be exercised at any time during the effective term of the lease agreement; and 4) The Port must have all the authorizations required for its operation.
SECTION IV
PURCHASE PRICE
Section 4.1.: Price. As sole and total consideration for the sale, assignment and transfer of the Stock-in-Trade, as well as the transferred assets, MC shall pay to MOLCA a purchase price of One Hundred and Sixty-Three Million, Five Hundred and Ten Thousand, Two Hundred and Twenty-Nine Argentine Pesos and 03/100 (AR$ 163,510,229.03) equal to Sixteen Million, Six Hundred and Sixty-Seven Thousand, Seven Hundred and Nine US Dollars and 38/00 (US$ 16,667,709.38), including VAT (hereinafter referred to as the Price).
Section 4.2.: Allocation of Price to Purchased Assets: The Price established by mutual agreement between the Parties shall be allocated among the assets purchased by MC as follows:
(i) Property, Plant and Equipment: Sixty Million, Forty-Three Thousand, Three Hundred and Seventy-Six Argentine Pesos and 51/100 (AR$ 60,043,376.51), including VAT.
(ii) Spare Parts: Two Million Argentine Pesos (AR$ 2,000,000), including VAT.
(iii) Reducción Plant: Ninety-Nine Million, Nine Hundred and Twenty-Seven Thousand, Two Hundred and Twenty-Two Argentine Pesos and 37/100 (AR$ 99,927.37), including VAT.
(iv) MARITIMA ARUBA Credit: Five Hundred and Forty-Five Thousand, Eight Hundred and Thirty-Eight Argentine Pesos and 21/100 (AR$ 545,838.21), including VAT, equal to USD 55641.
(v) The Policies: Nine Hundred and Ninety-Three Thousand, Seven Hundred and Ninety-One Pesos and 94/100 (AR$ 993,791.94), including VAT.
Section 4.3.: Expenses and Taxes. The Parties agree that the Price includes all Taxes and expenses to be paid as a result of the execution of this agreement. However, each Party shall bear the bank transfer expenses and Debit and Credit Tax applicable to them.
Section 4.4.: Price Payment Method. The Price shall be paid by MC to MOLCA by the assumption of the debt, up to the abovementioned amount (US$ 16,667,709.38), in addition to the other obligations assumed by MOLCA under the agreement executed with DEUTSCHE INVESTITIONS UND ENTWICKLUNGSGESELLSCHAFT MBH (hereinafter referred to as DEG), the copies of which have been attached hereto as Annex VIII.
As the assumption of the abovementioned debt implies express acceptance by DEG, MC shall have a term of six (6) months as of the acceptance of the Proposal to complete such proceedings.
Should MC fail to obtain total or partial acceptance by DEG, it shall pay to MOLCA the amount of the Price it has not paid by the assumption of the debt, in addition to other obligations to DEG.
In the latter circumstance, whether the amount of the debt to DEG that MC was unable to assume is total or partial, it must be paid to MOLCA within the same term and under the same financing conditions as those established between the latter and DEG. The Parties hereby state that, notwithstanding the fact that the price of the operation has been established in US dollars, provided that MC pays the amount corresponding to each installment owed by MOLCA to DEG, it shall be deemed to have complied with the assumed payment obligation. Should MC decide to pay the agreed price in conditions other than those established by mutual agreement between MOLCA and DEG, it must bear any additional costs that may result from the early payment.
Section 4.5.Delayed Payment.If the Price must be paid due to the impossibility of the assumption by MC of the debts to the Banking Entities, any delay in the payment of the installments pursuant to the last paragraph of Clause 4.4. shall result in automatic default, and MOLCA may charge a default interest equal to 1.5% monthly in dollars.
SECTION V
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
5.1.: Representations and warranties regarding MOLCA. MOLCA hereby represents and warrants to MC with respect to itself that, as of the date of this Proposal:
5.1.1. It has the right and full legal authority to execute and complete the operations provided for in this Proposal.
5.1.2. If accepted by MC, this Proposal shall constitute a valid and binding obligation, enforceable under its terms and conditions.
5.1.3. It is not subject to any legal, judicial or contractual restrictions with respect to the transfer of the Stock-in-Trade, or with respect to its components, nor is it subject to any pending legal proceedings, summary proceedings, legal actions or legal procedures restricting or prohibiting the completion of the operation provided for in this Proposal.
5.1.4. It is free of any encumbrance, injunction, seizure order, court order and/or any claim or any other action preventing it from freely disposing of the Stock-in-Trade or any of its components.
5.1.5. MOLCA is the lawful and legal owner of each of the assets of the Stock-in-Trade transferred to MC under this Proposal, including, but not limited to, the right to operate the Port Terminal and Multi-logistics Center under the name Las Palmas Terminal.
5.1.6. MOLCA has with respect to the Stock-in-Trade all authorizations and permits required to conduct its business activities and is additionally authorized under the permits issued by the competent authority and by the respective municipalities and/or the extensions of and amendments to such permits, to conduct the to operate the Port Terminal and Multi-Logistics Center business at the Port, and there are no legal limitations to its operation by MC.
Section 5.2.MCs Representations with Respect to the Stock-in-Trade. MC hereby represents with respect to the Stock-in-Trade that:
5.2.1. It has verified that there are no liabilities, debts, obligations or claims of any nature, whether of a commercial nature or in relation to labor, taxes, social security of the environment with respect to the operation of the Stock-in-Trade.
5.2.2. It has verified that there are no claims against MOLCA due to non-compliance with tax or social security obligations, nor are there any ongoing tax or social security inspections with respect to the Stock-in-Trade.
5.2.3. It has confirmed that the equipment currently used by MOLCA in the Stock-in-Trade is in normal operating conditions for the amortization and inventory status of each piece of equipment and receives maintenance and care in accordance with its use.
5.2.4. It has confirmed that MOLCA has complied, with respect to the employees it must transfer as a result of this Proposal, with all legal labor requirements, including those in relation to employment, equal opportunity, anti-discrimination, immigration, wages, work schedules, benefits, collective labor agreements, payment of social security charges and similar payments, occupational safety and health.
5.2.5. It has confirmed that, with the exception of the persons listed in Annex VI, there are no other persons with respect to which MOLCA or MC has labor-related responsibilities as purchaser of the Stock-in-Trade.
5.2.6. It has confirmed that no notices have been provided and MOLCA is not aware of any actions, legal proceedings or procedures filed by any person, or any pending arbitration or administrative proceedings or any other kind of procedures against MOLCA and in relation to the Stock-in-Trade.
SECTION VI
SUPERVENING LIABILITIES
Section 6.1.Liabilities Caused after the Operation. MC has conducted the required audits, on the basis of which it has determined that there are no hidden or contingent liabilities that may directly affect the Stock-in-Trade subject to the operations and, therefore, shall be fully responsible for any supervening liabilities that may arise, except for liabilities that could not have been reasonably detected under the audits conducted.
Section 6.2.Obligation to Indemnify. Furthermore, MC undertakes to pay, indemnify and hold MOLCA harmless (as well as its related companies, shareholders, directors, officials, agents and employees) from and against any claim, loss, legal proceedings, costs, damages, expenses, injuries, loss of profit, court costs, legal expenses and/or other obligations of any nature to be paid, due to any cause, as a result of liabilities occurring after the transfer of the Stock-in-Trade.
Section 6.3.Notice of Claim. By virtue of the obligation to indemnify established in the foregoing clause, should MOLCA (or its related companies, shareholders, directors, officials, agents and/or employees) consider that it has suffered or incurred a loss for which it is entitled to collect compensation under such section, it must immediately notify MC of such loss and provide any information available at that time. Should MOLCA fail to provide the notice required hereunder, such circumstance shall not affect its rights under this section in any way, except if such failure to provide notice is detrimental to the rights and actions to be taken by MC.
SECTION VII
GENERAL PROVISIONS
Section 7.1.Amendments. Once this Proposal is accepted, it may be amended only by mutual agreement of the Parties, in writing.
Section 7.2.Communications and Notices. All communications and notices that the Parties may wish to provide for the purposes of this Proposal shall be sent in writing to the following registered addresses:
TO MOLCA:
Registered Address: Av. de Mayo N° 560, Piso 1°.Ciudad Autónoma de Buenos Aires. Argentina.
TO MC:
Registered Address: Kennedy N° 160.Ciudad de Cañuelas, Provincia de Buenos Aires, Argentina.
Either of the Parties may, at any time, indicate another registered address at which to receive notices, by a notice sent to the other Party as indicated above.
Section 7.3.Assignment. Once this Proposal is accepted, the assumed rights and obligations shall be binding upon the Parties and their legal successors and/or assigns.
Section 7.4.Invalidity of Partial Nullity. Total or partial invalidity or nullity of any clause, section or article of this Proposal shall not affect the validity of any other clause section or article hereof.
Section 7.5.Expenses. Each Party shall bear the respective expenses incurred by them for the preparation, execution and performance of this Proposal, including, but not limited to, all fees and expenses to be paid to legal advisors, accountants and other agents and representatives. Furthermore, each of the Parties must pay the Taxes applicable in relation to the execution and performance of this Proposal. Should the Parties choose to follow the procedure established by Law No. 11,867 and other supplementary regulations, the expenses required to register the transfer of the Stock-in-Trade with the Public Registry of Commerce (i.e. publications, forms and stamps) shall be borne by the parties in equal proportions.
Section 7.6.Entire Contract.This Proposal, including its Annexes, constitutes the entire agreement and understanding between its Parties with regard to its purpose.
Section 7.7.Delays or Omissions.No delay or omission in exercising a right, power or recourse by MC with respect to any non-compliance or breach of any clause of this Proposal shall affect any right, power or recourse, nor shall such delay or omission be interpreted as constituting a waiver of the non-compliance or breach or acceptance in that respect, or with regard to any subsequently-occurring similar non-compliance or breach; nor shall any waiver of a single non-compliance or breach be deemed a waiver of a previously or subsequently-occurring non-compliance or breach, unless otherwise indicated. Furthermore, any waiver, authorization, consent or approval of any kind or nature by either of the Parties with respect to any non-compliance or breach by virtue of this Proposal must be provided in writing.
Section 7.8.Applicable Law.Jurisdiction. This Proposal, its validity, interpretation and compliance or non-compliance herewith shall be governed by the law of the Argentine Republic.
The Parties hereby submit to the jurisdiction of the Court of General Arbitration of the Buenos Aires Stock Exchange, with registered address at Sarmiento 299, Piso 1, city of Buenos Aires, in the event of any disputes, discrepancies or differences arising from or in relation to this Proposal, pursuant to applicable regulations for legal arbitration, of which the parties are aware and which they hereby accept. The arbitration shall take place in the city of Buenos Aires and the award shall be dated and signed in the city of Buenos Aires. The issued award shall be unappealable, mandatory and enforceable by the competent ordinary courts of the city of Buenos Aires, pursuant to the provisions of the National Civil and Commercial Code. In particular, the Parties waive their right to challenge the arbitration award, including, but not limited to, the filing of appeals and motions to vacate. Court costs shall be paid by the Parties as determined by the arbitration award. For all matters that cannot be submitted to arbitration, due to their nature, the Parties hereby agree to submit to the jurisdiction of the competent national ordinary courts located in the city of Buenos Aires, Argentine Republic, and expressly waive any other jurisdiction that may apply.
[illegible signature]
Annex I List of Property, Plants and Equipment
Vehicles
Number |
|
Description |
1 |
|
Volkswagen Bora 1.9 TDI Trendl |
1 |
|
Volkswagen Gol Trend 1.6 5D |
1 |
|
Volkswagen Gol Trend 1.6 3D |
1 |
|
Volkswagen Gol Trend 1.6 5D |
1 |
|
Chevrolet S10 2.8 TDI STD 4x2 |
1 |
|
FORD Focus Style 1.6-SEDAN 5D |
1 |
|
VW Voyage |
1 |
|
VW Gol Trend 1.6 Pack II |
1 |
|
Mondial FD250Q ATV |
1 |
|
Ford F-14700 Truck |
1 |
|
Chevrolet S10 2.8 TDI STD 4.2 2015 |
1 |
|
Mercedes Benz 1518 Truck |
Machinery
Number |
|
Description |
1 |
|
LIEBHERR LHM crane |
1 |
|
NUCTECH scanner, model CX 150180SI |
1 |
|
Massey Ferguson tractor and shovel |
1 |
|
Caterpillar BJI 02 motor grader |
1 |
|
Caterpillar BIF 84 skid steer loader |
1 |
|
Caterpillar BJI 04 skid steer loader |
1 |
|
Caterpillar BJI 03 excavator |
1 |
|
Front loader pat BJQ 04 |
1 |
|
Toyota forklift |
1 |
|
Toyota forklift |
1 |
|
Toyota forklift |
1 |
|
DRILL + GRINDER |
1 |
|
TAYLOR BSF 22 container |
1 |
|
Linde forklift |
1 |
|
Brush cutter |
1 |
|
FS 280 STHIL brush cutter |
1 |
|
KALMAR DRF 450 CKX 37 container |
1 |
|
BELOTTI B92 BAI 54 container |
1 |
|
CATERPILLAR DP35NT CAP 42 |
1 |
|
CATERPILLAR DP45K CAM 91 |
1 |
|
HILTI DD130 M DRILL |
1 |
|
ENG&TECH IKUSI TRANSMITTER |
1 |
|
Transmitter model T60/5 |
1 |
|
Sweeper 120 DK00552 |
1 |
|
Hydraulic press 50 tn |
1 |
|
Compressor set 10HP |
1 |
|
CHAINSAW 62CC 3.1 HP |
1 |
|
Chimango conveyor belt 18 m |
1 |
|
Brush cutter |
1 |
|
WEED CUTTER STHIL FS 280 |
1 |
|
Toyama Tractor 450 HP |
1 |
|
Brusch cutter 2.9 HP 44.3CC |
2 |
|
Cereal pump |
1 |
|
Raccolta single hopper14 TN |
1 |
|
GRANDE single hopper 12 tns |
1 |
|
Cereal hopper 5 TN |
1 |
|
Cereal hopper 5 TN |
1 |
|
ZANELLO 500 Tractor ct83 30424312 |
Furniture and Equipment Technology
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 2055 dn printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet 1606 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP OfficeJet 6500 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 2055 dn printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet 1022 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP Laserjet Pro 400 printer |
1 |
|
HP-Laserjet 4250n printer |
1 |
|
HP-Laserjet 4250n printer |
1 |
|
HP-Laserjet 4250n printer |
1 |
|
HP Laserjet 1606 printer |
1 |
|
HP LaserJet 1606 printer |
1 |
|
HP LaserJet 2055 printer |
1 |
|
HP LaserJet 2055 printer |
1 |
|
HP LaserJet 2055 printer |
1 |
|
HP LaserJet 2055 printer |
1 |
|
HP LaserJet 2055 printer |
1 |
|
Epson L355 printer with continuous system |
1 |
|
HP Deskjet 6900 printer |
1 |
|
HP Photosmart D110a printer |
1 |
|
HP Photosmart D110a printer |
1 |
|
LENOVO ThinkCentre M72e PC |
1 |
|
Lenovo 9218A2Y PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
Lenovo 9218A2Y PC |
1 |
|
Lenovo 9218A2Y PC |
1 |
|
HP Pro 3400 Series MT PC |
1 |
|
MSI H61M-P31 (G3) (MS-7788) PC |
1 |
|
Lenovo 9218A2Y PC |
1 |
|
ECS P4M800PRO-M CLONE PC |
1 |
|
ECS P4M800PRO-M CLONE PC |
1 |
|
Lenovo 9218A2Y PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
LENOVO ThinkCentre Edge72 PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Intel D845GVSR CLONE PC |
1 |
|
LENOVO ThinkCentre Edge72 PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
PC Lenovo 877332Y |
1 |
|
Intel D845GVSR CLONE PC |
1 |
|
Samsung Series 5 53OU4B NB |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
Lenovo ThinkCentre Edge72 PC |
1 |
|
775VM800 CLONE PC |
1 |
|
Lenovo ThinkCentre Edge72 PC |
1 |
|
Lenovo ThinkCentre Edge72 PC |
1 |
|
Lenovo ThinkCentre M72e PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Clone PC |
1 |
|
Lenovo ThinkCentre M72e PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Samsung Series 3 NB |
1 |
|
Toshiba BGH-TS400 NB |
1 |
|
Samsung Series 3 NP300 NB |
1 |
|
Samsung Series 3 NB |
1 |
|
Gigabyte G31M-ES2C CLONE PC |
1 |
|
SAMSUNG RV420 NB |
1 |
|
Lenovo Thinkpad E450 NB |
1 |
|
Lenovo L440 NB |
1 |
|
Lenovo ThinkCentre M72e PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
Lenovo ThinkCentre Edge72 PC |
1 |
|
Samsung Series 3 NB |
1 |
|
Intel D945GCLF CLONE PC |
1 |
|
MSI CLONE PC |
1 |
|
ECS P4M800PRO-M CLONE PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Gigabyte G31M-ES2C CLONE PC |
1 |
|
Lenovo ThinkCentre M72e PC |
1 |
|
Gigabyte G31M-ES2C CLONE PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
Lenovo ThinkCentre M73 PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
HP Compaq 4000 Pro SFF PC |
1 |
|
LENOVO ThinkPad Edge E430 NB |
1 |
|
LENOVO ThinkCentre Edge92 PC |
1 |
|
LENOVO ThinkCentre Edge92 PC |
1 |
|
LENOVO ThinkCentre Edge92 PC |
1 |
|
HP ProBook 6470b PC |
1 |
|
Lenovo ThinkCentre M72e PC |
1 |
|
HP Compaq dc5100 MT PC |
1 |
|
LENOVO ThinkCentre Edge92 PC |
1 |
|
LENOVO ThinkCentre Edge92 PC |
1 |
|
Dell Inspiron 14 3443 NB |
1 |
|
Lenovo G470 NB |
1 |
|
Becker (New) Lenovo B50-70 NB |
1 |
|
HP 430 Notebook PC NB |
1 |
|
Lenovo Thinkpad E440 NB |
1 |
|
MSI H61M-P31 (G3) CLONE PC |
1 |
|
BGH e-Nova EL-400 NB |
1 |
|
BGH e-Nova TS-400 NB |
1 |
|
Dell Inspiron 15 NB |
1 |
|
Toshiba NB |
1 |
|
Lenovo B50-70 NB |
1 |
|
Lenovo ThinkPad Edge E430 NB |
1 |
|
Lenovo L440 NB |
1 |
|
Scanner CanonLide1OO |
1 |
|
Scanner HP Scanjet G2710 |
Furniture and Equipment
Number |
|
Description |
98 |
|
Desk chairs |
101 |
|
Fixed chairs |
4 |
|
Cashier chairs |
77 |
|
Desks |
18 |
|
Rectangular tables |
3 |
|
Giant rectangular tables |
5 |
|
Round tables |
2 |
|
High cabinets without cover |
40 |
|
Low cabinets without cover |
17 |
|
High cabinets with cover |
53 |
|
Low cabinets with cover |
2 |
|
Beds |
8 |
|
Metal closet, 6 doors |
5 |
|
Metal sheet cabinet |
9 |
|
Drawer unit |
5 |
|
Corner units |
4 |
|
Filing cabinet/Map cabinet |
Leased Computer Equipment
Number |
|
Description |
|
|
IBM SERVER |
1 |
|
Express x3650 M4, Xeon 6C E5-2630v2 80W 2.6GHz/1600MHz/15MB, 8GB, O/Bay HS 2.5in SAS/SATA, SR M5110e, Multiburner, 550W p/s, Rack |
1 |
|
Intel Xeon 6C Processor Model E5-2630v2 80W 2.6GHz/1600MHz/15MB |
8 |
|
16GB (1x16GB, 2Rx4, 1.35V) PC3L-12800 CL11 ECC DDR3 1600MHz LP RDIMM |
2 |
|
Q.Logic 8Gb FC Dual-port HBA for IBM System x |
1 |
|
IBM System x 550W High Efficiency Platinum AC Power Supply |
1 |
|
IBM Integrated Management Module Advanced Upgrade |
1 |
|
IBM USB Memory Key for VMWare ESXi 5.5 |
|
|
STORAGE IBM |
1 |
|
V3700 LFF Expansion |
2 |
|
1.5m SAS Cable (mSAS HD to mSAS HD) EXP |
12 |
|
4TB 7.2K 3.5 NL HDD |
2 |
|
8GB Cache Upgrade |
12 |
|
900GB 10K 2.5 HDD |
|
|
RACK IBM |
1 |
|
NetBAY S2 25U Standard Rack Cabinet |
2 |
|
DPI Universal Rack PDU (Argentina) |
|
|
SOFTWARE |
1 |
|
VMware vSphere 5 Essentials Plus Kit for 3 hosts (Max 2 processors per host) |
1 |
|
Basic Support/Subscription VMware vSphere 5 Essentials Plus Kit for 1 year |
|
|
SWITCH / FIREWALL |
1 |
|
HP 2530-48G SWITCH |
1 |
|
1 Firewall ASA5512x with security bundle |
|
|
SERVICES |
1 |
|
HW IBM + VMWARE Professional Service |
1 |
|
MICROSOFT |
|
|
STORAGE EXPANSION |
1 |
|
V3700 LFF Expansion |
2 |
|
1.5m SAS Cable (mSAS HD to mSAS HD) EXP |
12 |
|
6TB 7.2K3.5 NL HDD |
|
|
SWITCH |
1 |
|
JG932A HP 5130-24G-4SFP+ E1 Switch |
3 |
|
J9726A - HP 2920-24G SWITCH |
2 |
|
JE008A HP 1910-24G-PoE(170W) Switch |
14 |
|
J4858C HP X121 1G SFP LC SX Transceiver |
Leased Non-Computer Equipment
1 |
|
CETEC Mod CJD 175E Generator |
Annex II List of Transferred Spare Parts
Number |
|
Description |
50.00 |
|
BLANK CD |
2.00 |
|
3-FLOOR PAPER TRAY |
1.00 |
|
3203 A BEARING |
12.00 |
|
SKF TSN-509-L SEAL |
1.00 |
|
6006 2RS BEARING |
9.00 |
|
6200-2RS BEARING |
4.00 |
|
6201 2RS BEARING |
6.00 |
|
6209-2RS BEARING |
10.00 |
|
6310 2RS BEARING |
4.00 |
|
22213 EK. BEARING |
1.00 |
|
30207 BEARING |
3.00 |
|
NU-316 BEARING |
2.00 |
|
SAV-5087 RETAINER |
10.00 |
|
H-311 SLEEVE |
4.00 |
|
H-313 SLEEVE |
3.00 |
|
H-315 SKF SLEEVE |
3.00 |
|
H-318SKF SLEEVE |
4.00 |
|
STEEL-TOED SHOES NO. 39 |
6.00 |
|
STEEL-TOED SHOES NO. 40 |
6.00 |
|
STEEL-TOED SHOES NO. 41 |
10.00 |
|
STEEL-TOED SHOES NO. 42 |
6.00 |
|
STEEL-TOED SHOES NO. 43 |
7.00 |
|
STEEL-TOED SHOES NO. 44 |
10.00 |
|
PVC CHEMICAL-RESISTANT GLOVES |
90.00 |
|
AMERICAN INDUSTRIAL GLOVES, SHORT |
2.00 |
|
WELDING APRON |
1.00 |
|
BEIGE SHIRT,SIZE 40 OMBU |
4.00 |
|
BEIGE SHIRT, SIZE 42 OMBU |
2.00 |
|
BEIGE SHIRT, SIZE 48 OMBU |
14.00 |
|
BEIGE PANTS SIZE 40 OMBU |
25.00 |
|
BEIGE PANTS SIZE 42 OMBU |
25.00 |
|
BEIGE PANTS SIZE 44 OMBU |
36.00 |
|
BEIGE PANTS SIZE 46 OMBU |
19.00 |
|
BEIGE PANTS SIZE 48 OMBU |
23.00 |
|
BEIGE PANTS SIZE 50 OMBU |
5.00 |
|
BEIGE PANTS SIZE 52 OMBU |
16.00 |
|
BEIGE PANTS SIZE 54 OMBU |
10.00 |
|
BEIGE PANTS SIZE 56 OMBU |
2.00 |
|
RUBBER BOOTS No. 40 |
1.00 |
|
RUBBER BOOTS No. 43 |
1.00 |
|
RUBBER BOOTS No. 44 |
1.00 |
|
RUBBER BOOTS No. 45 |
2.00 |
|
A-75 V BELT |
2.00 |
|
B-71 V BELT |
8.00 |
|
1 ANSI80-2 DOUBLE CHAIN |
5.00 |
|
2DOUBLE CHAIN |
57.00 |
|
178X7X22 (7) GRINDING WHEELS |
50.00 |
|
230X3, 2X22 (9) CUTTING PLATE |
37.00 |
|
400X4, 5X25, 4 CUTTING PLATE |
51.00 |
|
6010-2.5 MM CONARC ELECTRODE |
111.00 |
|
6010-3.25MM CONARC ELECTRODE |
133.00 |
|
13-2.5 MM CONARC ELECTRODE |
8.00 |
|
13-3.25 MM CONARC ELECTRODE |
25.00 |
|
18-2.5 MM CONARC ELECTRODE |
28.00 |
|
HIGH SPEED STEEL 18-TOOTH SAW BLADE |
196.00 |
|
HIGH SPEED STEEL 32-TOOTH SAW BLADE |
39.00 |
|
WET SANDPAPER 60 DOUBLE A |
41.00 |
|
WET SANDPAPER 80 DOUBLE A |
47.00 |
|
WET SANDPAPER 100 DOUBLE A |
34.00 |
|
WET SANDPAPER 120 DOUBLE A |
50.00 |
|
WET SANDPAPER 150 DOUBLE A |
41.00 |
|
WET SANDPAPER 240 DOUBLE A |
50.00 |
|
WET SANDPAPER 280 DOUBLE A |
48.00 |
|
WET SANDPAPER 320 DOUBLE A |
43.00 |
|
WET SANDPAPER 360 DOUBLE A |
44.00 |
|
WET SANDPAPER 600 DOUBLE A |
2.00 |
|
6 MM WIDIA BIT |
2.00 |
|
8 MM WIDIA BIT |
4.00 |
|
10 MM WIDIA BIT |
2.00 |
|
500 AMP. ELECTRODE CLAMP |
2.00 |
|
HELICTOR H500 HUB CLAMP |
61.00 |
|
6 MM HOLLOW WALL ANCHOR |
43.00 |
|
8 MM HOLLOW WALL ANCHOR |
46.00 |
|
10 MM HOLLOW WALL ANCHOR |
41.00 |
|
EMERY CLOTH 180-GRIT |
44.00 |
|
EMERY CLOTH 100-GRIT |
15.00 |
|
FIVE-THREAD BROOM |
15.00 |
|
FLANNEL CLOTH |
33.00 |
|
RAID INSECTICIDE SPRAY |
4.00 |
|
BATHROOM SOAP |
1001.00 |
|
45 X50 GARBAGE BAGS |
66.00 |
|
DETERGENT X5L |
159.00 |
|
COUNTERSUNK BOLTS 3/16X11/2 |
1539.00 |
|
TRUSS BOLTS 3/16X1/2 |
388.00 |
|
FLAT IRON WASHER 3/16 |
333.00 |
|
FLAT IRON WASHER 5/16 |
966.00 |
|
FLAT IRON WASHER 3/8 |
543.00 |
|
FLAT IRON WASHER 7/16 |
428.00 |
|
FLAT IRON WASHER 9/16 |
57.00 |
|
FLAT IRON WASHER 7/8 |
73.00 |
|
FLAT IRON WASHER 1 |
942.00 |
|
GROWER IRON WASHER 3/16 |
401.00 |
|
GROWER IRON WASHER 1/4 |
403.00 |
|
GROWER IRON WASHER 5/16 |
813.00 |
|
GROWER IRON WASHER 3/8 |
830.00 |
|
GROWER IRON WASHER 7/16 |
314.00 |
|
GROWER IRON WASHER 1/2 |
232.00 |
|
GROWER IRON WASHER 5/8 |
170.00 |
|
GROWER IRON WASHER 3/4 |
41.00 |
|
GROWER IRON WASHER 7/8 |
85.00 |
|
GROWER IRON WASHER 1 |
602.00 |
|
5/16HEX SCREWW THREAD |
3546.00 |
|
3/8 HEX SCREW W THREAD |
274.00 |
|
7/8 HEX SCREW W THREAD |
220.00 |
|
5/16 LOCKNUT |
67.00 |
|
1/4X1/2HEX BOLT W THREAD |
132.00 |
|
1/4X2 HEX BOLT W THREAD |
407.00 |
|
5/16X1/2 HEX BOLT W THREAD |
206.00 |
|
5/16X1 HEX BOLT W THREAD |
63.00 |
|
5/16X2 HEX BOLT W THREAD |
707.00 |
|
5/16X21/2 HEX BOLT W THREAD |
427.00 |
|
3/8X1 HEX BOLT W THREAD-1 |
200.00 |
|
3/8X11/4 HEX BOLT W THREAD |
1160.00 |
|
3/8X11/2 HEX BOLT W THREAD |
44.00 |
|
3/4X4 HEX BOLT W THREAD |
3.00 |
|
46 XL TELLUS OIL |
3.00 |
|
10/50 STAPLER |
82.00 |
|
10/50 X1000 MIT CLIPS |
100.00 |
|
10/64X1000 CLIPS |
38.00 |
|
ELASTIC BANDS X100 UNITS |
2.00 |
|
BLACK CARBON PAPER |
42.00 |
|
RALL. LEGAL SIZE PAPER |
9.00 |
|
PENCIL-PEN ERASER |
45.00 |
|
REGULAR BLACK PENCILS |
22.00 |
|
PENCIL CORRECTION FLUID |
20.00 |
|
YELLOW HIGHLIGHTER |
37.00 |
|
GREEN HIGHLIGHTER |
10.00 |
|
LEGAL SIZE PHOTOCOPY PAPER REAM |
7.00 |
|
BLACK STAMP INK X250ML |
15.00 |
|
PLASTIC HANDLE SCISSORS |
100.00 |
|
1 X2.5 MM BLACK SINGLE CORE CABLE |
190.00 |
|
4X1MM WORKSHOP CABLE |
300.00 |
|
4X1.5 MM WORKSHOP CABLE |
350.00 |
|
4X2.5 MM WORKSHOP CABLE |
59.00 |
|
3M PLASTIC INSULATING TAPE |
633.00 |
|
A13 TERMINAL |
4.00 |
|
105 WATT FLUORESCENT TUBE |
78.00 |
|
LEGAL SIZE SHEET PROTECTORS |
133.00 |
|
1/4 BITS |
123.00 |
|
5/8 BITS |
15.00 |
|
WHITE GLASS WELDING MASK |
7.00 |
|
6309-2RS BEARING |
261.00 |
|
3/16X1/2COUNTERSUNK BOLT W THREAD |
6.00 |
|
30306 J2/Q BEARING |
117.00 |
|
1 X1.5 MM BLACK SINGLE CORE CABLE |
19.00 |
|
FAX PAPER ROLL |
2.00 |
|
BEIGE SHIRT SIZE 50 OMBU |
1660.00 |
|
NUMBERED PLASTIC SEALS (HOPPERS) |
10.00 |
|
LOCTITE 609 |
118.00 |
|
3/16X1BOLTS |
5.00 |
|
B-45V BELT |
15.00 |
|
6004-2RS-C3 SKF BEARING |
12.00 |
|
6202-2RS-C3 BEARING |
34.00 |
|
6204-2RS-C3 SKF BEARING |
7.00 |
|
6206-2RS-C3 SKF BEARING |
7.00 |
|
6207-2RS-C3 SKF BEARING |
6.00 |
|
6307-2RS-C3 SKF BEARING |
1.00 |
|
6316 BEARING |
9.00 |
|
GRIDDED FIBER SPONGE |
3.00 |
|
X4L RUST-RESISTANT PAINT |
9.00 |
|
10X10CM RECTANGULAR BLIND COVER |
1.00 |
|
RUBBER BOOTS No. 39 |
111.00 |
|
TOILET BOWL CLEANER TABLETS |
10.00 |
|
100 MM BLACK SEALS |
14.00 |
|
DESK GLUE |
2.00 |
|
10A PHOTOCONTROL FOR LIGHTING DEVICES |
50.00 |
|
3/4X5 HEX BOLT W THREAD |
1.00 |
|
BLUE JACKET SIZE XXL WITH LOGO |
2.00 |
|
BEIGE PANTS SIZE 60 OMBU |
2.00 |
|
520 SNL SKF BEARING BOX |
45.00 |
|
BRUSH No. 10 BRISTLES |
6.00 |
|
2P C63 THERMOMAGNETIC CIRCUIT BREAKER |
8.00 |
|
1000W 220V HALOGEN LAMP |
10.00 |
|
250W GOLEAT MERCURY LAMP |
4.00 |
|
400W GOLEAT MERCURY LAMP |
10.00 |
|
EK/MB ZOLODA TERMINAL |
10.00 |
|
E/KZOLODA TERMINAL |
6.00 |
|
NH FUSE HOLDER BASE SIZE 3 |
10.00 |
|
NH 63A FUSE SIZE 00 SIE |
12.00 |
|
NH 160A FUSE SIZE 00 SIE |
13.00 |
|
NH 315A FUSE SIZE 2 SIE |
6.00 |
|
NH 355A FUSE SIZE 2 SIE |
16.00 |
|
NH 630A FUSE SIZE 3 SIE |
23.00 |
|
1NA/1NC AEA MODULE COD. M100 |
2.00 |
|
AUX. CONTACT BLOCKS |
6.00 |
|
3P C32 THERMOMAGNETIC CIRCUIT BREAKER |
20.00 |
|
12 MM X30 M SCOTCH TAPE |
10.00 |
|
No. 4 X100 CLIPS |
25.00 |
|
BLUE HIGHLIGHTER |
19.00 |
|
ORANGE HIGHLIGHTER |
100.00 |
|
FLUORESCENT TUBE STARTER |
4.00 |
|
105W FIXED BASEBOARD TUBE |
3.00 |
|
250W MERCURY BALLAST |
40.00 |
|
400X3,2X25,4MM CUTTING PLATE |
48.00 |
|
SIGLO XXI FRAME |
17.00 |
|
3P.P. GROUNDED OUTLET |
9.00 |
|
EDISON PORCELAIN LAMP HOLDER |
10.00 |
|
E40 GOLIATBJB SCREW LAMP HOLDER |
26.00 |
|
1X2.5 BLACK PIRELLI VN CABLE |
4.00 |
|
AME. CONNECT. PHONE JACK |
86.00 |
|
DISTILLED WATER X 5 L |
70.00 |
|
BLEACH X 5 L |
79.00 |
|
10 MM FISHER WALL PLUGS |
11.00 |
|
360 MM BLACK SEALS |
47.00 |
|
3/16X11/2 HEX BOLT W THREAD |
7.00 |
|
GV2 - M 20MOTOR GUARD |
6.00 |
|
LR2-D1314 7 A 10 A RELAY |
2.00 |
|
LR2-D1310 4 A 6 A RELAY |
19.00 |
|
380V 32A STECK MALE PLUG |
7.00 |
|
220V 16A STECK FEMALE PLUG |
5.00 |
|
POSITIVE (+) TERMINAL FOR BATTER |
5.00 |
|
NEGATIVE (-) TERMINAL FOR BATTERY |
2.00 |
|
9 VOLT ALKALINE BATTERY |
13.00 |
|
FLIPCHART PAGES X20 UNITS |
2.00 |
|
206 2F YAR BEARING |
2.00 |
|
522-619 BEARING BOX |
1.00 |
|
1 CABLE GLAND |
9.00 |
|
5X18 POP RIVET |
126.00 |
|
8 MM HOSE COD: 0000012530 |
126.00 |
|
6 MM HOSE COD: 0000012529 |
6.00 |
|
3P C6 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
3P C10 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
3P C50 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
EPSON 800 LX PRINTING RIBBON |
17.00 |
|
NH 100A FUSE SIZE 1 SIEM |
3.00 |
|
TIP TOP HARDENER UT-R20 40G |
1.00 |
|
6319-C3 BEARING |
1.00 |
|
ALUMINUM LIGHTING FIXTURE PROTECTOR |
16.00 |
|
26W DULUXD LOW ENERGY LAMPS |
2.00 |
|
FUSE HOLDER BASE FOR CARTRIDGE |
1.00 |
|
220 24+24 1.5W TRANSFORMER |
77.00 |
|
30W FLUORESCENT TUBE |
4.00 |
|
6212-2RS-C3 SKF BEARING |
23.00 |
|
6312-2RS-C3 SKF BEARING |
1.00 |
|
BLUE SWEATSHIRT SIZE XXL WITH LOGO |
17.00 |
|
ADHESIVE WEATHER STRIP |
28.00 |
|
SELF-AMALGAMATING INSULATION TAPE |
40.00 |
|
PVC 3/4 ELECTRIC CABLE GLAND |
32.00 |
|
PVC 7/8 ELECTRIC CABLE GLAND |
5.00 |
|
CONTACT CLEANSING SPRAY |
48.00 |
|
6006-3M FILTERFOR HALF-MASK |
32.00 |
|
CIF GLASS CLEANER |
111.00 |
|
5N11 PRE-FILTER RETAINER |
17.00 |
|
6301-2RS BEARING |
73.00 |
|
5L DEODORANT |
6.00 |
|
1P C2 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
3P C16 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
GV2 M16 MOTOR GUARD |
6.00 |
|
1P C6 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
1P C10 THERMOMAGNETIC CIRCUIT BREAKER |
8.00 |
|
1P C16 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
1P C25 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
1P C32 THERMOMAGNETIC CIRCUIT BREAKER |
14.00 |
|
2P C10 THERMOMAGNETIC CIRCUIT BREAKER |
14.00 |
|
2P C25 THERMOMAGNETIC CIRCUIT BREAKER |
21.00 |
|
3P C40 THERMOMAGNETIC CIRCUIT BREAKER |
15.00 |
|
3P C63 THERMOMAGNETIC CIRCUIT BREAKER |
18.00 |
|
3P C25 THERMOMAGNETIC CIRCUIT BREAKER |
145.00 |
|
LEGAL SIZE PLASTIC SEPARATOR |
23.00 |
|
RY2S - SY2S-05 RELAY BASE |
6.00 |
|
400 W COMPLETE SODIUM BALLAST |
10.00 |
|
620 X50G LOCTITE |
66.00 |
|
TRANSPARENT LEGAL SIZE FOLDER |
2.00 |
|
LARGE LATEX GLOVES |
1.00 |
|
OXYGEN TUBE |
10.00 |
|
567 X50 ML LOCTITE |
20.00 |
|
10X38 CERAMIC FUSE SLOW 0.5A |
20.00 |
|
10X38 CERAMIC FUSE SLOW 1A |
21.00 |
|
10X38 CERAMIC FUSE SLOW 2A |
10.00 |
|
10X38 CERAMIC FUSE SLOW 10A |
10.00 |
|
10X38 CERAMIC FUSE SLOW 16A |
44.00 |
|
75 X75 ADHESIVE POST IT |
58.00 |
|
10X1.5X50MM METRIC BOLT |
8.00 |
|
500 VOLT. LONG DIELECTRIC GLOVES |
28.00 |
|
BSC 11/4 ALUMINUM CABLE GLAND |
10.00 |
|
BSC 11/2 ALUMINUM CABLE GLAND |
20.00 |
|
BSP 2 ALUMINUM CABLE GLAND |
9.00 |
|
SAYLENS HEARING PROT. FOR HELMET |
2.00 |
|
6203 2RS BEARING |
7.00 |
|
6308 2RS C3 BEARING |
53.00 |
|
48 X50 3M ADHESIVE TAPE |
26.00 |
|
RECT. CONNEC. COD: 0.431.011.221 |
18.00 |
|
3M1270 HEARING PROTECTOR |
52.00 |
|
12 MM HOLLOW WALL ANCHOR |
9.00 |
|
SAFETY HARNESS AND SLING |
2.00 |
|
32209-J2 BEARING |
17.00 |
|
11W-E27 LOW-ENERGY LAMP |
5.00 |
|
NUMBERED MINUTES BOOK |
97.00 |
|
PVC 1/2 ELECTRIC CABLE GLAND |
1.00 |
|
CYLINDER COD: 0.048.260.450. |
35.00 |
|
SCOTT KIMBERLY-CLARK TOWEL |
18.00 |
|
1/2 TO 3/8 GAS REDUCING BUSH |
13.00 |
|
1/2 BRONZE OR GALVANIZED PLUG |
20.00 |
|
1/4 JOINT |
2.00 |
|
DBH-9533 RETAINER |
128.00 |
|
36 WATT FLUORESCENT TUBE |
6.00 |
|
30204 2RS BEARING |
2.00 |
|
30205 2RS BEARING |
8.00 |
|
242 X250ML LOCTITE |
27.00 |
|
114X1.6X22 (4) CUTTING PLATE |
116.00 |
|
A4 PHOTOCOPY PAPER REAM |
2.00 |
|
20W50 MULTIGRADE OIL 20 L |
3.00 |
|
TELLUS S2 M 68 OIL X20L |
12.00 |
|
BEIGE PANTS SIZE 38 OMBU |
2.00 |
|
BEIGE PANTS SIZE 58 OMBU |
3.00 |
|
SHELL RETINAX GREASE EPX2 WITH M |
12.00 |
|
205-UC BEARING |
205.00 |
|
SHELL DONAXTD OIL 10W30 20L |
3.00 |
|
No. 5 STAMP PAD |
12.00 |
|
CHAIN LUBRICANT X300 ML |
8.00 |
|
CIRC. STEEL BRUSH 47X178X12 |
6.00 |
|
SHELL OMALA 320 OIL X20L |
3.00 |
|
TELLUS S2 M 32 OIL X20L |
6.00 |
|
3P C20 THERMOMAGNETIC CIRCUIT BREAKER |
17.00 |
|
60 X50CM ECOGRIS MOP |
107.00 |
|
3/16X1 GALV. COUNTERSUNK SCREW |
42.00 |
|
M6X1X20 ALLEN HEAD SCREW |
24.00 |
|
TRAPEZ. RETRACT. CUTTER |
1.00 |
|
SHELL OMALA 220 OIL X20L |
85.00 |
|
KIMBERLY LIQUID SOAP |
28.00 |
|
KLEENEX TOILET PAPER |
6.00 |
|
6311 2RS C3 BEARING |
1.00 |
|
BLUE JACKET SIZE S WITH LOGO |
14531.60 |
|
DIESEL OIL |
6.00 |
|
2T OIL |
52.00 |
|
68 HYDRAULIC FLUID |
40.00 |
|
OMALA 320 OIL BEARINGS |
2.00 |
|
No. 70 EP2 AGUILA GREASE |
30.00 |
|
BASELUXPLEXM-2/BM GREASE |
54.00 |
|
PLEX20200/2 GREASE |
10.00 |
|
BRAKE FLUID X1L |
8.00 |
|
COOLANT X 4L |
4.00 |
|
45828 J DEERE AIR FILTER |
10.00 |
|
BT351 FILTER |
4.00 |
|
COMB 1R0751CAT FILTER |
4.00 |
|
117-4089 CAT FILTER |
2.00 |
|
WK 842/2 MANN FILTER |
4.00 |
|
XS618B1 MAL.2 INDUCTIVE SENSOR |
4.00 |
|
XSAV 12801 INDUCTIVE SENSOR |
26.00 |
|
50 1/2 COPPER TIN TERMINAL |
59.00 |
|
B26 PRE-INSULATED BLUE TERMINAL |
121.00 |
|
1X2.5MM GREEN YELLOW CABLE |
2.00 |
|
X2000WTS BALLAST |
25.00 |
|
NHT00160A 3NH FUSE HOLDER BASE |
1.00 |
|
30-20 ALUMINUM TIN BOX |
12.00 |
|
50MFP 250VAC CAPACITOR |
26.00 |
|
STECK H CONNECTOR 32A 3POLES+NEUTR+ |
34.00 |
|
M CONNECTOR 2P+T32A |
4.00 |
|
3.6VOLT BAYONET BULB |
24.00 |
|
NH100A FUSE SIZE 0 |
9.00 |
|
NH 250A FUSE SIZE 1 |
6.00 |
|
NH1 200A FUSE |
19.00 |
|
1000W HIGH PRESSURE SODIUM IGNITOR |
48.00 |
|
100 MUN HINGE |
69.00 |
|
175 MUN HINGE |
2.00 |
|
SYNTH. TILE ENAMEL X3.6L |
5.00 |
|
SYNTH. YELLOW ENAMEL X4L |
4.00 |
|
SYNTH. VERMILION ENAMEL X4L |
1.00 |
|
BLACK ACRYLIC ENAMEL X20L |
2.00 |
|
INT. WHITE LATEX PAINT X20L |
3.00 |
|
C-102 V BELT |
6.00 |
|
C-100 V BELT |
9.00 |
|
C-117 BELT |
17.00 |
|
C-143V BELT |
3.00 |
|
C-315V BELT |
3.00 |
|
C-345 V BELT |
6.00 |
|
C-97 BELT |
8.00 |
|
C-105 BELT |
3.00 |
|
C-330 V BELT |
2.00 |
|
C-65 V BELT |
4.00 |
|
B60 BELT |
5.00 |
|
DBH 6626 RETAINER |
5.00 |
|
DBH 8750 RETAINER |
32.00 |
|
DBH 52821 RETAINER |
3.00 |
|
DBH 5233 RETAINER |
1.00 |
|
DBH 5279 RETAINER |
3.00 |
|
DBH 5567 RETAINER |
8.00 |
|
DBH 5920 RETAINER |
13.00 |
|
DBH 6656 RETAINER |
4.00 |
|
DBH 8365 RETAINER |
13.00 |
|
DBH 8846 RETAINER |
1.00 |
|
DBH 8986 RETAINER |
31.00 |
|
LEGAL SIZE FILING CABINET |
23.00 |
|
A4 SIZE FILING CABINET |
40.00 |
|
No. 3 CLIP |
50.00 |
|
PLASTIC FILE BOX |
3.00 |
|
SMALL CALCULATOR |
180.00 |
|
HANGING FOLDER |
538.00 |
|
A4 SIZE SHEET PROTECTORS |
47.00 |
|
32MM BINDER CLIPS |
37.00 |
|
51MM BINDER CLIPS |
13.00 |
|
0.50MM 2B LEAD |
17.00 |
|
FOLDER CLIP |
10.00 |
|
HOLE PUNCH |
17.00 |
|
0.5 MM LEAD HOLDER |
17.00 |
|
30CM TRANSPARENT SIFAP RULER |
19.00 |
|
FAX ROLLS |
15.00 |
|
STAPLE REMOVER |
9.00 |
|
SHARPENER |
179.00 |
|
A4 SIZE SEPARATOR |
6800.00 |
|
15 X27 ENVELOPE SAMPLE |
8.00 |
|
NOTE BOARD |
7.00 |
|
TRIPLE CONTINUOUS FORM |
456.00 |
|
A4 SIZE ENVELOPE |
222.00 |
|
LEGAL SIZE ENVELOPE |
16.00 |
|
HP 1022 PRINTER TONER |
676.00 |
|
FLAT IRON WASHER 3/4 |
13.00 |
|
S.R.M.1/2 BIT |
60.00 |
|
14X2 SELF-DRILLING SCREW |
10.00 |
|
TOILET BRUSH |
10.00 |
|
WASTEBIN |
5.00 |
|
30CM GONDOLA BROOM |
9.00 |
|
PVC 60CM FRANC BROOM |
86.00 |
|
WOODEN BROOMSTICK |
3.00 |
|
DUSTER |
4.00 |
|
SMALL SQUEEGEE |
18.00 |
|
BIG SQUEEGEE |
10.00 |
|
SAWDUST BAG |
14.00 |
|
CLOTH BAG X10KG |
22.00 |
|
LISOFORM DISINFECTANT |
30.00 |
|
ROOM DEODORIZING SPRAY |
22.00 |
|
PVC 100CM FRANC BROOM |
20.00 |
|
15GR STAINLESS STEEL SPONGE |
77.00 |
|
OFF INSECTICIDE SPRAY |
53.00 |
|
TOILET PAPER |
7.00 |
|
MOP |
33.00 |
|
VALERINA CLOTH |
41.00 |
|
VIRULANA STEEL WOOL |
4.00 |
|
12 MM WIDIA BIT |
10.00 |
|
1 TEE |
5.00 |
|
1/2 TEE |
407.00 |
|
4 GRINDING WHEEL |
46.00 |
|
9 GRINDING WHEEL |
2.00 |
|
WIDE CEREAL SHOVEL |
23.00 |
|
200 MICRON NYLON ROLL |
19.00 |
|
2 NAIL |
20.00 |
|
3 NAIL |
21.00 |
|
5 NAIL |
30.00 |
|
7 NAIL |
3000.00 |
|
BOTTLE SEAL |
11.00 |
|
3/4 GALVANIZED ELBOW |
14.00 |
|
1 A 90° GALVANIZED ELBOW |
11.00 |
|
1/2 GALVANIZED ELBOW |
34.00 |
|
1/2 GALVANIZED COUPLING |
26.00 |
|
1 GALVANIZED COUPLING |
5.00 |
|
PPN 2 JOINT |
5.00 |
|
3/4 JOINT |
5.00 |
|
1/2 X25 CORD |
1.00 |
|
1/2 X30 CORD |
4.00 |
|
1/2 BALL VALVE |
8.00 |
|
3/4 BALL VALVE |
2.00 |
|
3/4 X100 MM NIPPLE |
18.00 |
|
3/4 GALVANIZED PLUGS |
7.00 |
|
3/4 GALVANIZED TEE |
26.00 |
|
1/2 DOUBLE GALVANIZED COUPLING |
20.00 |
|
3/4 DOUBLE GALVANIZED COUPLING |
20.00 |
|
BUNDLE WIRE XKG |
7.00 |
|
No. 31 LOCK |
2.00 |
|
No. 40 LOCK |
3.00 |
|
No. 50 LOCK |
24.00 |
|
1/2 X20 M TEFLON |
15.00 |
|
AA BATTERIES |
2.00 |
|
POLYURETHANE (FOAM) |
4.00 |
|
FIRE EXTINGUISHER BRACKET |
2.00 |
|
11/2 THREADED ROD |
7.00 |
|
3/8 THREADED ROD |
18.00 |
|
N 12 MASK GLASS |
202.00 |
|
P95 PARTICLE FILTER |
150.00 |
|
P100 PARTICLE FILTER |
10.00 |
|
NITRILE GLOVES |
22.00 |
|
WELDING GLOVES |
4.00 |
|
FACE MASKS |
2.00 |
|
CAT AIR FILTERS 222.9021 |
25.00 |
|
18W FLUORESCENT TUBE COOL LIGHT |
91.00 |
|
RED BIC PEN |
64.00 |
|
BLACK BIC PEN |
266.00 |
|
BLUE BIC PEN |
36.00 |
|
BLACK PERMANENT MARKER |
1.00 |
|
AAA BATTERIES |
73.00 |
|
STRETCH FILM ROLL X5KG |
95.00 |
|
TBR 100 50 CABLE ANCHOR |
43.00 |
|
2PT10AMP SOCKET |
6.00 |
|
STEEL BRUSH |
28.00 |
|
CUTTER |
3.00 |
|
DBH 5128 RETAINER |
8.00 |
|
AXS 42 BELT |
2.00 |
|
22215EA BEARING |
12.00 |
|
TURPENTINE THINNER X1LT |
40.00 |
|
12 X50 WRAPPING TAPE |
48.00 |
|
18X50 WRAPPING TAPE |
6.00 |
|
CAT 1R-0739 MOTOR OIL FILTER |
2.00 |
|
COMB CAT 1R0753 FILTER |
7.00 |
|
CAT 233 9856 FILTERS |
3.00 |
|
CAT 145 4501 FILTERS |
2.00 |
|
CAT 131 8822 FILTERS |
30.00 |
|
2P C6 THERMOMAGNETIC CIRCUIT BREAKER |
11.00 |
|
2P C32 THERMOMAGNETIC CIRCUIT BREAKER |
13.00 |
|
C60H2P X4A THERMOMAGNETIC CIRCUIT BREAKER |
40.00 |
|
PVC 1/4 CABLE GLAND |
1.00 |
|
200A 330ALR9F7375 THERMAL RELAY |
54.00 |
|
25MM MM TERMINAL |
182.00 |
|
1/2X95MM TERMINAL |
45.00 |
|
10X38 NH 6A CYLINDRICAL FUSE |
14.00 |
|
GR50AMP FUSE |
11.00 |
|
2X25A30MA CIRCUIT BREAKER |
2.00 |
|
CAT TRANSMISSION 1R-0773 FILTER |
20.00 |
|
3/4 THREADED ROD |
3.00 |
|
XSA V11373 INDUCTIVE SENSOR |
12.00 |
|
X500W HALOGEN LAMP |
1.00 |
|
FASTIX SEALANT GUN |
16.00 |
|
CLEAN. PLASTIC BUCKET |
6.00 |
|
SKFTSN-518-LSEAL |
13.00 |
|
SKF TSN-520-LSEAL |
3.00 |
|
SKF TSN-511-LSEAL |
9.00 |
|
SKFTSN-522-LSEAL |
16.00 |
|
SKFTSN-516-LSEAL |
2.00 |
|
7/8 THREADED ROD |
28.00 |
|
3/8 CLAMP |
1566.00 |
|
95X120 SPECIAL BAG |
30.00 |
|
CONCENT. LIQUID DEODORANT |
7.00 |
|
6V 4.5AH GEL BATTERY |
10.00 |
|
18W FLUORESCENT TUBE DAY LIGHT |
5.00 |
|
FK 1005 LIMIT SWITCH |
288.00 |
|
1/2 FLAT IRON WASHER |
70.00 |
|
7018-3.25 MM CONARC ELECTRODE |
17.00 |
|
HP CE505A TONER |
1.30 |
|
AT F LUBRAXX OIL 20L |
2.00 |
|
MD 400 SAE 30 OIL X20L LUBRAX |
4.00 |
|
BACTISAN KIMBERLY ALCOHOL GEL |
6.00 |
|
MANN C30850/2 FILTER |
42.00 |
|
IP44 32A 380V COLD STAMPING BASE |
32.00 |
|
02 A DIAZED FUSE |
20.00 |
|
04 A DIAZED FUSE |
28.00 |
|
06 A DIAZED FUSE |
26.00 |
|
10 A DIAZED FUSE |
20.00 |
|
20 A DIAZED FUSE |
36.00 |
|
25 A DIAZED FUSE |
27.00 |
|
35 A DIAZED FUSE |
36.00 |
|
50 A DIAZED FUSE |
36.00 |
|
63 A DIAZED FUSE |
184.00 |
|
5/16X10MM COOPER TIN TERMINAL |
163.00 |
|
TYVEK T:2 DISPOSABLE OVERALLS |
37.00 |
|
36W/840 BALLAST FOR FLUORESCENT TUBE |
97.00 |
|
60 4 FLAPWHEEL |
93.00 |
|
80 FLAPWHEEL |
120.00 |
|
120 FLAPWHEEL |
43.00 |
|
RUBBER GLOVES |
1.00 |
|
ALCOHOL GEL CONTAINER XSL |
8.00 |
|
PANTER DEGEASER X5LT |
4.00 |
|
6314-2RS BEARING |
11.00 |
|
33013 Q BEARING |
31.00 |
|
3.5X50 MM LAG BOLT |
113.00 |
|
12X1.50X50MM METRIC BOLT |
7.00 |
|
12X1.5X35MM METRIC BOLT |
92.00 |
|
10X1.25X40MM METRIC BOLT |
74.00 |
|
10X1.50X20MM METRIC BOLT |
56.00 |
|
10X1.5X30MM METRIC BOLT |
17.00 |
|
10X1.25X25MM METRIC BOLT |
57.00 |
|
14X1.50X50MM METRIC BOLT |
8.00 |
|
8X1.25X30MM METRIC BOLT |
90.00 |
|
8X1.25X45MM METRIC BOLT |
56.00 |
|
10X1.25X50MM METRIC BOLT |
6.00 |
|
300 MM BLACK SEALS |
22.00 |
|
8X1.25 X50 MM METRIC BOLT |
1.00 |
|
6X50MM IRON WOOD SCREW |
4.00 |
|
200 MM BLACK SEALS |
17.00 |
|
BLACK MARKER FOR BOARD |
24.00 |
|
WATER CONTAINER X20L |
50.00 |
|
80 X100 GARBAGE BAG |
80.00 |
|
WHITE PIQUE SHIRT SIZE XL |
22.00 |
|
BRUSH No. 20 BRISTLES |
19.00 |
|
10 CM SYNTHETIC PAINT ROLLER |
48.00 |
|
20 CM SYNTHETIC PAINT ROLLER |
35.00 |
|
8 X30 2A CERAMIC FUSE |
1.00 |
|
ANTI-RUST PAINT X20L |
39.00 |
|
EMERY CLOTH 120-GRIT |
49.00 |
|
EMERY CLOTH 80-GRIT |
10.00 |
|
HAND SOAP DISPENSER |
9.00 |
|
CONTACT CEMENT X500CM3 |
400.00 |
|
NON-WOVEN FIBER FACE MASKS |
5.00 |
|
250MM BLACK SEAL |
4.00 |
|
400MM BLACK SEAL |
9.00 |
|
6MM2 HOT MELT ADHESIVE |
27.00 |
|
WHITE PIQUE SHIRT SIZE S |
51.00 |
|
WHITE PIQUE SHIRT SIZE M |
92.00 |
|
WHITE PIQUE SHIRT SIZE L |
12.00 |
|
WHITE PIQUE SHIRT SIZE XXL |
8.00 |
|
WHITE PIQUE SHIRT SIZE XXXL |
25.00 |
|
WHITE COVER FOR 3MODULES |
7.00 |
|
TOILET PLUNGER |
37.00 |
|
WHITE HELMETS WITH HARNESS |
31.00 |
|
CIF CREAM |
266.00 |
|
C-3 PRE-INSULATED TERMINAL |
59.00 |
|
C-10 PRE-INSULATED TERMINAL |
71.00 |
|
5/16X25MM COPPER TIN TERMINAL |
71.00 |
|
V20 TRANSPARENT GOGGLES |
1190.00 |
|
90X120 GARBAGE BAGS |
10.00 |
|
HAND TOWEL DISPENSER |
3.00 |
|
BEIGE SHIRT SIZE 52 OMBU |
32.00 |
|
38 X 50 POST IT |
1.00 |
|
WHITE ROAD MARKING PAINT |
2.00 |
|
STEEL-TOED SHOES No. 36 |
1.00 |
|
STEEL-TOED SHOES No. 37 |
3.00 |
|
STEEL-TOED SHOES No. 38 |
2.00 |
|
STEEL-TOED SHOES No. 45 |
2.00 |
|
STEEL-TOED SHOES No. 46 |
100.00 |
|
15W LOW-ENERGY LAMP |
110.00 |
|
RANDO HD46 OIL |
3.00 |
|
WEIDMULLER SIGNAL ISOLATING CONVERTER |
8.00 |
|
SIEMENS PT5A5T30 BASE WITH RELAY |
6.00 |
|
5A 250V BASE RELAY |
37.00 |
|
CAMBRE MODULE BOX 1 |
6.00 |
|
SCHNEIDER LA1KN22 AUX. CONTACT |
9.00 |
|
TELEMEC LADN22 AUX. CONTACT |
11.00 |
|
LC1K0910M7 SCHNEIDER CONTACTOR |
4.00 |
|
LC1D80M7 TELEMEC CONTACTOR |
3.00 |
|
13X1575 BELT |
3.00 |
|
8PK1290 BELT |
5.00 |
|
AX35 BELT |
4.00 |
|
B134 BELT |
2.00 |
|
B 46 BELT |
4.00 |
|
C93 BELT |
18.00 |
|
1 GALVANIZED JOINT |
1.00 |
|
3 P + N 380 V 5076 STECK CONNECTOR |
5.00 |
|
P502085 DONALDSON FILTER |
1.00 |
|
CAT 32B4020100 OIL FILTER |
2.00 |
|
FLEETGUARD LF9080 OIL FILTER |
2.00 |
|
FRAM HPH 6349 A OIL FILTER |
4.00 |
|
FRAM PH 6882 OIL FILTER |
10.00 |
|
BALDWIN PT 752 HYDRAULIC OIL FILTER |
4.00 |
|
CAT 093-7521 X HYDRAULIC OIL FILTER |
4.00 |
|
CAT 1G-8878 HYDRAULIC OIL FILTER |
2.00 |
|
CAT 9187602700 HYDRAULIC OIL FILTER |
3.00 |
|
TOYOTA 15601-7600971 OIL FILTER |
3.00 |
|
BALDWIN PA 2519 AIR FILTER |
1.00 |
|
BALDWIN PA 5302 AIR FILTER |
1.00 |
|
BALDWIN RS 4580 AIR FILTER |
4.00 |
|
CAT 110-6331 AIR FILTER |
4.00 |
|
FLEETGUARD AF25830 AIR FILTER |
4.00 |
|
FLEETGUARD HF 7909 AIR FILTER |
1.00 |
|
FRAM CA4255 AIR FILTER |
6.00 |
|
FRAM CA 4329 AIR FILTER |
1.00 |
|
HASTING JR3548R AIR FILTER |
3.00 |
|
HASTING JR3567R AIR FILTER |
4.00 |
|
TOYOTA 177412360071 AIR FILTER |
5.00 |
|
TOYOTA 177442360071 AIR FILTER |
5.00 |
|
BALDWIN BT 8409 FILTER |
11.00 |
|
BALDWIN BT8878 FILTER |
3.00 |
|
BALDWIN BW 5075 FILTER |
1.00 |
|
KALMAR 9238551183 FILTER |
2.00 |
|
KALMAR 922316-0007 FILTER |
2.00 |
|
COMB FRAM G 4715 FILTER |
1.00 |
|
COMB PROMATCH 214059 FILTER |
11.00 |
|
FLEETGUARD AF25897 AIR FILTER |
5.00 |
|
KALMAR 923976-2805 HYDRAULIC FILTER |
7.00 |
|
TOYOTA 326701262071 HYDRAULIC FILTER |
14.00 |
|
TOYOTA 675022660071 HYDRAULIC FILTER |
3.00 |
|
FRAM PR 3414REFRIG. FILTER |
6.00 |
|
CAT 131-1812 SEPARATOR FILTER |
24.00 |
|
6A NH000 FUSE |
1.00 |
|
125A NH00 FUSE |
35.00 |
|
4A 8X31MM CYLIND. FUSE |
37.00 |
|
6A 8X31MM CYLIND. FUSE |
2.00 |
|
LITHIUM SOAP |
8.00 |
|
H3 12V BULB |
6.00 |
|
H3 24V BULB |
4.00 |
|
18W WHITE LIGHT BULB |
16.00 |
|
AP 400W SODIUM LAMP |
6.00 |
|
4P C63 THERMOMAGNETIC CIRCUIT BREAKER |
20.00 |
|
4P C25 THERMOMAGNETIC CIRCUIT BREAKER |
11.00 |
|
2PC16 THERMOMAGNETIC CIRCUIT BREAKER |
14.00 |
|
185MM SLEEVE |
21.00 |
|
30-UCCL-10 SLEEVE |
38.00 |
|
0100 000 052 MICRO PRESSURE GAUGE |
2.00 |
|
HIGH-VOLTAGE PROTECTION MASK |
1.00 |
|
MICRO REPAIR KIT 0101 000 007 |
56.00 |
|
MICRO REPAIR KIT 0101 000 016 |
1.00 |
|
HYSTAR MBW-03-C PNEUMATIC VALVE |
19.00 |
|
NC AEA MODULE COD. M200 |
12.00 |
|
RJ45 JELUZ SUPPORT |
20.00 |
|
11/2X100 GALV. NIPPLE |
3.00 |
|
SKF TSN-526-L SEAL |
5.00 |
|
SKF TSN-532-L SEAL |
2.00 |
|
TOYOTA 56630-26600-71 REAR LAMP |
67.00 |
|
CORRUGATED PAPER X1.2 M |
1.00 |
|
TOYOTA 436021331071 PIN |
2.00 |
|
TOYOTA 815527601471 BOLT |
4.00 |
|
TOYOTA 525492342071 BOLT |
1.00 |
|
TOYOTA 911625167071 REAR BOLT |
1.00 |
|
ORANGE MARKING PAINT |
63.00 |
|
5/8 BSC PLASTIC CABLE GLAND |
30.00 |
|
9 PG PLASTIC CABLE GLAND |
8.00 |
|
24 V IDEC RY2S-VL RELAY |
21.00 |
|
24 V OMRON 00-071 RELAY |
2.00 |
|
DBH 9019 RETAINER |
3.00 |
|
DBH 6654 RETAINER |
3.00 |
|
DBH 8228 RETAINER |
3.00 |
|
DBH 5148 RETAINER |
2.00 |
|
DBH 5488 RETAINER |
4.00 |
|
DBH 9301 RETAINER |
6.00 |
|
DBH 5200 RETAINER |
1.00 |
|
DBH 5281 RETAINER |
34.00 |
|
DIAM 22MM 2 POSITION SELECTOR |
1.00 |
|
SILO LEVEL SENSOR |
1.00 |
|
KALMAR 920169.011 TEMP. SENSOR |
1.00 |
|
KALMAR 800045201 SENSOR |
1.00 |
|
KALMAR 920147023 SENSOR |
1.00 |
|
KALMAR 9240151314 SENSOR |
1.00 |
|
KALMAR J020321 PRESS. SENSOR |
1.00 |
|
KALMAR 923828601 TEMP SENSOR |
1.00 |
|
KALMAR 9239410552 TEMP SENSOR |
1.00 |
|
KALMAR 9239761560 TEMP SENSOR |
4.00 |
|
LED SIGN (EMERGENCY EXIT) |
1.00 |
|
LIEBHERR 602008214 SUPPORT |
100.00 |
|
LIEBHERR 62009214 SUPPORT |
1.00 |
|
KALMAR 9238551247 KEY |
42.00 |
|
EMERY CLOTH 60 |
53.00 |
|
6MM TERMINAL |
599.00 |
|
2 X 10MM BLUE PIN TERMINAL |
78.00 |
|
16MM X 5/16 COPPER TIN TERMINAL |
19.00 |
|
70MM X 5/8 COPPER TIN TERMINAL |
583.00 |
|
C11 YELLOW FORK TERMINAL |
21.00 |
|
120MM YELLOW EYELET TERMINAL |
14.00 |
|
16A 220V EMB 412663 SCAME SOCKET |
24.00 |
|
32A 220V SCAME 310-3243 SOCKET |
38.00 |
|
RJ45 JELUZ COMPUTER SOCKET LID |
17.00 |
|
20A 250V KALOP SOCKET |
15.00 |
|
278A TONER |
17.00 |
|
MESH CLOTH |
2.00 |
|
KALMAR 51010390 SCREW |
1.00 |
|
1/2 MICRO 101000264 REG. FILTER |
121.00 |
|
B16 BLUE JOINT |
4.00 |
|
11/4 THREADED ROD |
2.00 |
|
2 THREADED ROD |
41.00 |
|
36W BASEBOARD FLUOR TUBE WITH STARTER |
181.00 |
|
120W BASEBOARD FLUOR TUBE |
1.00 |
|
KALMAR 9236570010 WASHER |
2.00 |
|
KALMAR 660 BULB |
1.00 |
|
KALMAR 664 BULB |
1.00 |
|
KALMAR 665 BULB |
1.00 |
|
KALMAR 666 BULB |
1.00 |
|
KALMAR 91205960029 PRESS. SENSOR |
1.00 |
|
KALMAR 9209430058 CTRL SENSOR |
1.00 |
|
LC1D95R7 CONTACTOR |
4.00 |
|
2 GALV TEE |
26.00 |
|
3/4 X50MM GALV NIPPLE |
5.00 |
|
11/2 GALV TEE |
10.00 |
|
1 GALV PLUG |
18.00 |
|
11/4 GALV PLUG |
30.00 |
|
1 1/2 GALV JOINT |
6.00 |
|
WOOD FILLER |
1.00 |
|
POLYESTER FILLER |
15.00 |
|
BLACK SAFETY GOGGLES |
2.00 |
|
25MM WIDIA DIAM BIT |
56.00 |
|
HYDROCARBON GLOVES |
8.00 |
|
WASTE SHOVEL WITH HANDLE |
10.00 |
|
MINERAL ABSORBENT X10KG |
7.00 |
|
B 47 BELT |
3.00 |
|
TSXCDP501 CABLE TERMINAL |
200.00 |
|
A6 8MM RED EYELET TERMINAL |
178.00 |
|
B2 EYELET TERMINAL |
250.00 |
|
A2 EYELET TERMINAL |
197.00 |
|
A11 FORK TERMINAL |
782.00 |
|
M 6.3MM SHOVEL TERMINAL WITH LATCH |
4.00 |
|
H 6.3MM SHOVEL TERMINAL WITH LATCH |
41.00 |
|
A14 RED JOINT |
60.00 |
|
C14 YELLOW JOINT |
2.00 |
|
120 X 300MM ALUMINUM BOX |
19.00 |
|
CONIN ANTI-EXPLOSIVE CAP |
4.00 |
|
PROXTELEM XS7C40DP210 SENSOR |
8.00 |
|
PROX TELEM PC440 SENSOR |
7.00 |
|
105W LOW-ENERGY BULB |
16.00 |
|
23W LONG-LIFE BULB |
18.00 |
|
H4 12V BULB |
19.00 |
|
H4 24V BULB |
11.00 |
|
H4 24V BASEBOARD BULB |
48.00 |
|
36 SIMPLE BASEBOARD FLUORES. TUBE |
5.00 |
|
MOTION DETECTOR |
8.00 |
|
25 A2P THERMAL CUTOFF |
6.00 |
|
2P C40 THERMOMAGNETIC CIRCUIT BREAKER |
6.00 |
|
2P C4 THERMOMAGNETIC CIRCUIT BREAKER |
2.00 |
|
6.3A CIRCUIT BREAKER |
3.00 |
|
CAT 223-9974 FILTER |
4.00 |
|
CAT328-3655 FILTER |
5.00 |
|
BALDWIN BT839-10 FILTER |
1.00 |
|
KALMAR 920483-001 FILTER |
5.00 |
|
KALMAR 923855-1184 |
1.00 |
|
KALMAR 923732-0010 |
1.00 |
|
KALMAR 923636-0756 |
1.00 |
|
KALMAR SOLENOID J020307 |
2.00 |
|
KALMAR K5679210 |
2.00 |
|
TOYOTA 600X90 REAR TIRES |
2.00 |
|
BALDWIN PA2518 FILTER |
6.00 |
|
SMALL TWISTLOCK |
2.00 |
|
LARGE TWISTLOCK |
2.00 |
|
TOYOTA 90119-08013-71 |
8.00 |
|
TOYOTA 61237-20540-71 |
2.00 |
|
TOYOTA 04652-20080-71 |
1.00 |
|
TOYOTA 587202660071 MIRROR |
2.00 |
|
3RH1911 1FA22 AUXILIARY CONTACT |
11.00 |
|
SELECTOR WITH KEY |
13.00 |
|
24V OMRON 00-154 RELAY |
3.00 |
|
TOYOTA 437512344071 CONNECTING ROD |
2.00 |
|
TOYOTA 909160395471 THERMOSTAT |
2.00 |
|
TOYOTA 438122332071 BOLT |
2.00 |
|
SUB CTOYOTA 474603366071 SCREW |
5.00 |
|
TOYOTA 901791400171 SCREW |
9.00 |
|
82 BLACK CARTRIDGE FOR HP |
7.00 |
|
11 CYAN CARTRIDGE FOR HP |
3.00 |
|
11 MAGENTA CARTRIDGE FOR HP |
5.00 |
|
96 BLACK CARTRIDGE FOR HP |
2.00 |
|
97 COLOR CARTRIDGE FOR HP |
9.00 |
|
60 BLACK CARTRIDGE FOR HP |
6.00 |
|
60 COLOR CARTRIDGE FOR HP |
4.00 |
|
C-138 BELT |
10.00 |
|
90G HIGH TEMPERATURE SILICONE |
5.00 |
|
B 133 BELT |
329.00 |
|
A16 TERMINAL |
456.00 |
|
A17 TERMINAL |
142.00 |
|
C4 TERMINAL |
1.00 |
|
UTP X 305MT CAT5E CABLE ROLL |
206.00 |
|
40X30 BL CABLE DUCT |
608.00 |
|
2.5 RED SINGLE-CORE CABLE |
190.00 |
|
2.5 BLACK SINGLE-CORE CABLE |
6.00 |
|
1 COPPER CABLE GLAND |
129.00 |
|
S.R.M. 3/4 BIT |
23.00 |
|
BELLOWS FOR SHIPPING SCALE |
54.00 |
|
14 CUTTING PLATE |
3.00 |
|
45827 J JOHN DEERE AIR FILTER |
3.00 |
|
CAT 222.9020 AIR FILTERS |
6.00 |
|
CAT 110.6326 AIR FILTERS |
2.00 |
|
CAT 61 2499 FILTERS |
2.00 |
|
CAT 131 8821 FILTERS |
5.00 |
|
CAT 110 6331 FILTERS |
4.00 |
|
CAT 61 2500 FILTERS |
2.00 |
|
STAPLERS |
30.00 |
|
CERAMIC SPRAY |
490.00 |
|
80W90 OIL |
1.00 |
|
31316 BEARING |
16.00 |
|
SAFETY GOGGLES |
525.00 |
|
PART.N95 ROAD MASKS |
62.00 |
|
DANGER TAPE |
11.00 |
|
BACK SUPPORTS |
454.00 |
|
DOTTED GLOVES |
4.00 |
|
21/2 BRONZE JET WITH NOZZLE |
28.00 |
|
FLUORESCENT VESTS |
1.00 |
|
BLUE JACKET SIZE XS WITH LOGO |
2.00 |
|
STEEL-TOED DIELECTRIC SHOES No. 43 |
3.00 |
|
STEEL-TOED DIELECTRIC SHOES No. 42 |
150.00 |
|
110 G/L SODIUM HYPOCHLORITE |
1.00 |
|
BEIGE SHIRT SIZE 54 OMBU |
6.00 |
|
TN 580 TONER |
63.00 |
|
SCREW FOR CAT 3F-5108 |
20.00 |
|
11/2 GALV DOUBLE JOINT |
3.00 |
|
1 -1/2 GALV REDUCING BUSH |
10.00 |
|
11 YELLOW CARTRIDGE |
10.00 |
|
2 GALV. ELBOW |
12.00 |
|
2300MM SCALE BRUSH |
49.00 |
|
780 GREEN PELIKAN MARKER |
62.00 |
|
780 RED PELIKAN MARKER |
18.00 |
|
780 BLUE PELIKAN MARKER |
2.00 |
|
CAT 1R-0722 HYDRAULIC FILTER |
1.00 |
|
NU 2206 BEARING |
4.00 |
|
30209 J2/Q BEARING |
2.00 |
|
236849/10 BEARING |
2.00 |
|
6216 C3 BEARING |
2.00 |
|
CAT 180-7487 CABIN FILTER |
4.00 |
|
DBH 9295 RETAINER |
187.00 |
|
85W-140 OIL |
1.00 |
|
DBH 8270 RETAINER |
410.00 |
|
HD 100 OIL X205L |
40.00 |
|
MORLINA 10 OIL X20L |
10.00 |
|
A4 STAMPED REAMS |
2.00 |
|
CAT 126-1818 HYDRAULIC FILTER |
2.00 |
|
CAT 093-7521 HYDRAULIC FILTER |
2.00 |
|
CAT 126-2081 HYDRAULIC DRAIN FILTER |
2.00 |
|
CAT 51-8670 HYDRAULIC PILOT FILTER |
2.00 |
|
CAT 111-8738 CABIN FILTER |
2.00 |
|
CAT 185-8154 CABIN FILTER |
3.00 |
|
CAT 41-1278 CABIN FILTER |
4.00 |
|
CAT 1R-0734 MOTOR OIL FILTER |
4.00 |
|
C-58 BELT |
4.00 |
|
ROAD PAINT THINNER |
6.00 |
|
INT/EXT ACRYLIC PLAS. SPACKLE |
2.00 |
|
X20L EXT. WHITE LATEX PAINT |
3.00 |
|
BALDWIN BT7144 OIL FILTER |
6.00 |
|
11/2 GALV. M-H ELBOW |
4.00 |
|
DBH 6912 RETAINER |
2.00 |
|
GEL ALCOHOL DISPENSER |
6.00 |
|
KLEENEX TOILET PAPER DISPENSER |
4.00 |
|
SKFTSN-530-L SEAL |
1.00 |
|
3M-6800 MASK |
40.00 |
|
PAINT STRAINING FILTER |
4.00 |
|
32:20 L HYDRAULIC OIL |
25.00 |
|
17X8 CM SPIRAL POCKET AGENDA |
4.00 |
|
COMPITT COMPRESSED AIR |
18.00 |
|
3M 502 FILTER ADAPTER |
2.00 |
|
INTERLUB CISNE 400 X20KG GREASE |
10.00 |
|
CHEVRON 1000 HF GREASE |
3.00 |
|
TEXACO SOLU. OIL 00786 |
1.00 |
|
INTERLUB PHS GR. 2 X20KG BREASE |
1.00 |
|
ORANGE EPOXY PAINT X 1L |
2.00 |
|
1.2MM WELDING WIRE |
18.00 |
|
SMALL FIRE EXTINGUISHER MARKER PLATE |
13.00 |
|
LARGE FIRE EXTINGUISHER MARKER PLATE |
39.00 |
|
M 6X50 HEX BOLT |
7.00 |
|
58W TUBE BALLAST |
8.00 |
|
11W TUBE BALLAST |
15.00 |
|
16 MICROF. 250 WU CAPACITOR |
35.00 |
|
400W SODIUM IGNITOR |
18.00 |
|
100W MERCURY IGNITOR |
20.00 |
|
660W 250V BASEBOARD FOR STARTER |
98.00 |
|
8-WAY MALE CONNECTOR |
7.00 |
|
PHOTOCELL BASE |
2.00 |
|
FHSS 33ILU 25 FUSES |
99.00 |
|
8-WAY FEMALE CONNECTOR |
75.00 |
|
2-WAY MALE CONNECTOR |
120.00 |
|
2-WAY FEMALE CONNECTOR |
90.00 |
|
4-WAY FEMALE CONNECTOR |
97.00 |
|
6-WAY FEMALE CONNECTOR |
99.00 |
|
6-WAY MALE CONNECTOR |
94.00 |
|
4-WAY MALE CONNECTOR |
9.00 |
|
SCH. KAL 174 EMERGENCY STOP |
7.00 |
|
RED AEA DIAM 22MM KEYPAD |
20.00 |
|
GREEN AEADIAM 22MM KEYPAD |
20.00 |
|
BLACK AEA DIAM 22MM KEYPAD |
3.00 |
|
NA AEA MODULE COD. M300 |
16.00 |
|
RED SCHNEIDER KEYPAD |
9.00 |
|
TELEMEC. EMERGENCY STOP |
10.00 |
|
COMBINED KEYPAD |
1.00 |
|
LA5FF431 CONTACT SET |
2.00 |
|
LA5F6431 CONTACT SET |
3.00 |
|
7A250U OMROM RELAY BASEBOARDS |
10.00 |
|
LADN11 AUX. CONTACT BLOCK |
1.00 |
|
24 V LCIK0610B7 CONTACTOR |
1.00 |
|
LC1D25B724U CONTACTOR |
1.00 |
|
WEG 10016934 PLAST. FAN |
6.00 |
|
5.5-8A THERMAL RELAY |
2.00 |
|
8-11, 5A THERMAL RELAY |
1.00 |
|
THERMAL RELAY 90 - 150 A |
5.00 |
|
1544 OBA HOUR METER |
13.00 |
|
32 A 3 P THERMAL CUTOFF |
6.00 |
|
50 A 3 P THERMAL CUTOFF |
4.00 |
|
LED SIGN |
3.00 |
|
LC1K0601M7 CONTACTOR |
2.00 |
|
92 A LC1DWKI2M7 CONTACTOR |
5.00 |
|
40-63A GV3ME63 CONTACTOR |
2.00 |
|
25-40A GV3ME40 CONTACTOR |
1.00 |
|
LC1F330M7 CONTACTOR |
5.00 |
|
TELEMEC 3TH2031- RELAY CONTROL |
30.00 |
|
10 A POINT |
3.00 |
|
CAT 6 SL 110 JACK CONNECTORS |
10.00 |
|
CAMBRE ADAPTER FRAME |
13.00 |
|
ZOLONDA 1CABLE GLAND |
25.00 |
|
ZOLODA 1/2 CABLE GLAND |
7.00 |
|
12038AHB COOLER |
3.00 |
|
VGA HD15 1.5MM VIDEOCABLE |
3.00 |
|
AD-VGA CONVERTER |
51.00 |
|
CABLE TIE |
2.00 |
|
INDUCTIVE SENSOR WITH CABLE |
2.00 |
|
USD 2.0 T 5 CABLE |
2.00 |
|
22KW LC1D50M7 CONTACTOR |
54.00 |
|
KALOP 10 A FEMALE CONNECTORS |
80.00 |
|
KALOP 10 A MALE CONNECTORS |
2.00 |
|
E 80 ELASTIC COUPLING |
2.00 |
|
E45 ELASTIC COUPLING |
20.00 |
|
3/8 8 PIPE ELBOW |
5.00 |
|
F 206 SUPPORT |
1.00 |
|
6 IRON FLANGE |
1.00 |
|
8 IRON FLANGE |
4.00 |
|
TOYOTA 84612-76012- SEAL KIT |
1.00 |
|
HYSTAR DSG-3- C2-N-01 VALVE |
1.00 |
|
HYSTAR MBW-01-C VALVE |
4.00 |
|
5311 DBH RETAINER |
2.00 |
|
5467 DBH RETAINER |
4.00 |
|
6026 DBH RETAINER |
2.00 |
|
6743 DBH RETAINER |
1.00 |
|
6852 DBH RETAINER |
4.00 |
|
8977 DBH RETAINER |
1.00 |
|
SKF 150X180X12 RETAINER |
2.00 |
|
6028 C3 BEARING |
8.00 |
|
FL 205 BEARING BOX |
45.00 |
|
1/2 A 90° 0441991221 ELBOW |
8.00 |
|
1/2 0101003464 FRL |
70.00 |
|
12MM TE 0451.041.200 CONNECT. |
39.00 |
|
3/8X10MM TE 441981017CONNECT. |
124.00 |
|
10MM TE 451041000 CONNECT. |
2.00 |
|
TOYOTA 04432-10120-71 REP. KIT |
4.00 |
|
TOYOTA 04654-20090-71 REP. KIT |
3.00 |
|
TOYOTA 04654-30340-71 REP. KIT |
10.00 |
|
TOYOTA 42481-33240-71 REP. KIT |
1.00 |
|
TOYOTA 43603-13310-71 REP. KIT |
2.00 |
|
TOYOTA 56640-26600-71 REP. KIT |
4.00 |
|
TOYOTA 63383-23420-71 REP. KIT |
2.00 |
|
E 90 ELASTIC COUPLING |
1.00 |
|
E 105 ELASTIC COUPLING |
1.00 |
|
FAG 515 SEAL |
4.00 |
|
TOYOTA 046552011171 BELLOWS |
1.00 |
|
LIEBHERR 8003671001 PLATE |
3.00 |
|
6603 DBH RETAINER |
1.00 |
|
5913 DBH RETAINER |
3.00 |
|
5902 DBH RETAINER |
4.00 |
|
5471 FBH RETAINER |
1.00 |
|
5134 DBH RETAINER |
5.00 |
|
HP LASERJET PRO 400 TONER |
50.00 |
|
920X60X250 3-LAYER SILO BAG |
2.00 |
|
STEEL-TOED DIELECTRIC SHOES No. 40 |
3.00 |
|
STEEL-TOED DIELECTRIC SHOES No. 41 |
30000.00 |
|
18X30 SAMPLE ENVELOPE |
5.00 |
|
TURBO EXTRA OIL TURBO + 15W40 |
1.00 |
|
MOD No. 7 150MM COUPLING |
2.00 |
|
TUPAC 130MM COUPLING |
1.00 |
|
TUPAC 50MM COUPLING |
6.00 |
|
STAR COUPLING |
28.00 |
|
8 X 1.5 X 50MM METRIC BOLT |
4.00 |
|
15MM SIMPLE ASA ROLLER CHAIN |
40.00 |
|
15MM SIMPLE ASA CHAIN JOINT |
7.00 |
|
15MM HALF MESH FOR CHAIN |
4.00 |
|
15MM DOUBLE ASA CHAIN JOINT |
1.00 |
|
25MM HALF MESH FOR CHAIN |
5.00 |
|
50MM DOUBLE ASA CHAIN JOINT |
1.00 |
|
40MM DOUBLE ASA CHAIN JOINT |
4.00 |
|
40MM DOUBLE HALF MESH |
6.00 |
|
C103 BELT |
4.00 |
|
C134 BELT |
5.00 |
|
C158 BELT |
3.00 |
|
B 136 BELT |
4.00 |
|
B 90 BELT |
4.00 |
|
B 64 BELT |
1.00 |
|
CUMMINS 3911585 KALMAR BELT |
6.00 |
|
13 X 1250 BELT |
4.00 |
|
5 PK 855 BELT |
2.00 |
|
8 PK1435 BELT |
6.00 |
|
A 63 BELT |
2.00 |
|
12 X 25 CM TOOTHED FLAT BELT |
17.00 |
|
27W LOW-ENERGY BULB |
20.00 |
|
DL1 220V NEON LAMP |
15.00 |
|
CAMBRE 20A SOCKET |
3.00 |
|
KALOP 10A SOCKET |
20.00 |
|
RICHI 20A SOCKET |
36.00 |
|
JELUZ 20A SOCKET |
11.00 |
|
JELUZ 10A SOCKET |
5.00 |
|
RJ11 3 ADAPTOR FOR 1 |
8.00 |
|
1000W INT. MERC. HALOG. BALLAST |
13.00 |
|
400W EXT. MERC. HALOG. BALLAST |
1.00 |
|
400W MERC. HALOG. BALLAST FOR INT. |
2.00 |
|
A P 250W HALOG. SODIUM BALLAST |
3.00 |
|
250W HIGH-PRESS. SODIUM BALLAST |
2.00 |
|
1000W EXT. MERC. HALOG. BALLAST |
5.00 |
|
1000W HALOG. SODIUM BALLAST |
7.00 |
|
RED MRZ 97005 MARKER |
20.00 |
|
1/2 ELECTRIC CABLE GLAND SCREW |
50.00 |
|
3/4 ELECTRIC CABLE GLAND SCREW |
49.00 |
|
11/2 CABLE GLAND SCREW |
30.00 |
|
1 ALUMINUM CABLE GLAND |
30.00 |
|
4-PAIR UTP CABLE |
44.00 |
|
11/2 DAYSA STAPLE |
19.00 |
|
GROUNDED DOUBLE GLAND |
28.00 |
|
PHONIX CONT. TYP. RAIL TERMINAL BOARD |
4.00 |
|
D INT5MMX60MM LONG SLEEVE |
48.00 |
|
D INT2.5MMX60MM LONG SLEEVE |
9.00 |
|
D INT 4MMX30MM LONG SLEEVE |
44.00 |
|
D INT 5MMX35MM LONG SLEEVE |
17.00 |
|
D INT3MMX25MM LONG SLEEVE |
4.00 |
|
D INT7MMX35MM LONG SLEEVE |
282.00 |
|
1 X 2.5MM BROWN CABLE |
63.00 |
|
1X2.5MM LIGHT BLUE CABLE |
83.00 |
|
1.5-4MMX3/16 EYELET TERMINAL |
121.00 |
|
2.5-5MMX3/16 EYELET TERMINAL |
493.00 |
|
6.3MM MALE SHOVEL TERMINAL |
10.00 |
|
ZOLODA D-BTN-2.5 TERMINAL BOARD LID |
9.00 |
|
ZOLODA D-BD4 TERMINAL BOARD LID |
32.00 |
|
185X5/8 EYELET TERMINAL |
281.00 |
|
C5 8MM YELLOW EYELET TERMINAL |
86.00 |
|
C6 10MM YELLOW EYELET TERMINAL |
426.00 |
|
C15 6.3MM FEMALE SHOVEL TERMINAL |
190.00 |
|
C18 10MM PIN PLAN TERMINAL |
200.00 |
|
AI16-12 15MM YE PIN TERMINAL |
110.00 |
|
B4 5MM BLUE EYELET TERMINAL |
65.00 |
|
B5 6MM BLUE EYELET TERMINAL |
230.00 |
|
B6SMM BLUE EYELET TERMINAL |
200.00 |
|
B11 6MM FORK TERMINAL |
112.00 |
|
B17 4MM FEMALE SHOVEL TERMINAL |
246.00 |
|
B18 6.3MM FEMALE SHOVEL TERMINAL |
503.00 |
|
B19 6.3MM MALE SHOVEL TERMINAL |
80.00 |
|
11MM BLUE PIN TERMINAL |
100.00 |
|
0.75MM BLUE PIN TERMINAL |
200.00 |
|
A4 RED EYELET TERMINAL |
90.00 |
|
A5 RED EYELET TERMINAL |
100.00 |
|
A15 RED FEMALE SHOVEL TERMINAL |
100.00 |
|
CTN6 GREEN PIN TERMINAL |
100.00 |
|
CTN10 BROWN PIN TERMINAL |
200.00 |
|
AI4-10 GY GREY PIN TERMINAL |
8.00 |
|
3V LITHIUM BATTER |
2.00 |
|
12 V 12 A RECHARGEABLE BATTERY |
3.00 |
|
12 V 20 HR RECHARGEABLE BATTERY |
1.00 |
|
ALUMINUM WALL BOX |
10.00 |
|
100X100X70 BASE ALUMINUM BOX |
4.00 |
|
GV2-MC01 EXTERIOR CHEST |
12.00 |
|
2 RICHI MODULE BOX |
10.00 |
|
ZOL. BLIND UNIV. FRAME HOLDER BOX |
7.00 |
|
PLASTIC BOX FOR PUSH-BUTTON (AEA) |
8.00 |
|
TERMINAL STRIP FOR CABTYRE CABLE |
1.00 |
|
E40 PROJECTOR TRAY |
1.00 |
|
250X250X150MM ALUMINUM BOX |
250.00 |
|
3/4CONNECTOR FOR LIGHT TUBE |
2.00 |
|
ABB XLP-1 FUSE SWITCH |
4.00 |
|
GV2 ME203 MAGNETIC CIRCUIT BREAKER |
2.00 |
|
GV2 L14 MAGNETIC CIRCUIT BREAKER |
9.00 |
|
4P C32 THERMOMAGNETIC CIRCUIT BREAKER |
5.00 |
|
10 A MOTOR GUARD |
1.00 |
|
680MM PNEUMATIC CYLINDER WITH PISTON ROD |
6.00 |
|
500MM ELASTIC PNEUMATIC CYLINDER WITH PISTON ROD |
7.00 |
|
1/4 4MM STRAIGHT CONNECTOR |
39.00 |
|
3/8X12MM TE. CONNECT. |
40.00 |
|
3/8X12MM ELBOW CONNECT. |
63.00 |
|
3/8X10MM ELBOW CONNECT. |
4.00 |
|
3/8-8MM TE CONNECTOR |
70.00 |
|
3/8 X 10MM STRAIGHT CONNECTOR |
1.00 |
|
BOSTON L5 REDUCER |
1.00 |
|
350MM DIAM. PNEUMATIC CYLINDER WITH PISTON ROD |
1.00 |
|
300MM DIAM. PNEUMATIC CYLINDER WITH PISTON ROD |
10.00 |
|
CYLINDER LOCK FOR OFFICE DRAWER |
5.00 |
|
SQUARE WALL BOX |
14.00 |
|
3/8 BRONZE JOINT |
15.00 |
|
1/2-12MM TE CONNECTOR |
3.00 |
|
A 90° 2 PVC ELBOW |
3.00 |
|
2 PVC CROSS |
5.00 |
|
2 TO 1 1/4 PVC REDUCTION |
1.00 |
|
1 PVC ELBOW |
1.00 |
|
1 PVC COUPLING |
4.00 |
|
11/2 PVC BALL VALVE |
14.00 |
|
SMALL ADJUSTABLE HOOK |
2.00 |
|
13X14.00X14.5-20 WHEEL TUBE |
18.00 |
|
50 CM LONG SCALE BRUSH |
4.00 |
|
FB 13.5/ BEARING CASING STAMP |
97.00 |
|
5/8 270MM LONG TENSOR |
8.00 |
|
3M HALF MASK FILTER COVER |
2.00 |
|
12V MARKER TRIANGLE |
56.00 |
|
3 X 25 COUNTERSUNK LAG BOLT |
23.00 |
|
2 HEX SCREW |
12.00 |
|
20 X 15 CM WHITE ENVELOPE |
209.00 |
|
23 X 12 CM WHITE ENVELOPE |
5.00 |
|
NEUMANN X-1 250VAC 5A SWITCH |
45.00 |
|
10MM POLYURETHANE TUBE |
16.00 |
|
12MM POLYURETHANE TUBE |
6.00 |
|
MICRO 0101000062 CUP HOLDER |
8.00 |
|
MICRO 52000102 REP. KIT |
12.00 |
|
CUP WITH MICRO PURGE |
25.00 |
|
MICRO LUBRICANT CUP |
3.00 |
|
1-GROOVEPULLEY EXT.DIAM. 120MM |
2.00 |
|
1-GROOVEPULLEY EXT.DIAM. 110MM |
2.00 |
|
3-GROOVEPULLEY EXT. DIAM. 80MM |
8.00 |
|
1/2 FLANGE |
55.00 |
|
CAT 4K 0367(SCREW) REP. KIT |
1.00 |
|
6051-266-14 MALE CONNECTOR |
1.00 |
|
6051-223-14 ASSEMBLY WRENCH |
2.00 |
|
5920-467-14 FLAT SEAL |
2.00 |
|
1054-320-1 FLAT SEAL |
1.00 |
|
7264-254-14 SEALING COMPOUND |
2.00 |
|
6030-001-08 HOT MELT ADHESIVE |
1.00 |
|
8112-019-14 LIEBHERR LOCTITE |
5.00 |
|
240MM FAN BLADE |
2.00 |
|
150MM FAN BLADE |
2.00 |
|
400MM FAN BLADE |
9.00 |
|
FR G 1/2 MIC PRESSURE REGULATOR |
6.00 |
|
CONVEYOR BELT REP. KIT |
2.00 |
|
SADDLE WITH UCFL208 BEARING |
4.00 |
|
FAG FL BEARING CASING |
1.00 |
|
SKF 70X 100X10 RETAINER |
1.00 |
|
DBH 9392 RETAINER |
1.00 |
|
DBH 5421 RETAINER |
1.00 |
|
DBH 8229 RETAINER |
9.00 |
|
UCFL 205 BEARING AND BOX |
1.00 |
|
22219 BEARING |
1.00 |
|
22211 EKB33 BEARING |
2.00 |
|
22215 EAK C3 BEARING |
1.00 |
|
NU 205 BEARING |
1.00 |
|
GRAE30 NPP BAS 2/W4 BEARING |
10.00 |
|
SECURITY CONE |
139.00 |
|
6 X 25 HEX SCREW FOR WOOD |
555.00 |
|
3/16 X 3/4 COUNTERSUNK SCREW |
54.00 |
|
3/16 X 2 HEX SCREW |
285.00 |
|
1/2X1 1/2 COUNTERSUNK ALLEN SCREW |
2.00 |
|
22209 BEARING |
20.00 |
|
RJ45 MODULE |
13.00 |
|
DISPOSABLE NITRILE GLOVES |
239.00 |
|
37X45CM MANILA ENVELOPE |
3.00 |
|
BEIGE PANTS SIZE 36 OMBU |
5.00 |
|
COMPITT CLEANING SPONGE |
64.00 |
|
A4 FOLDER WITH TRANSPARENT COVER |
30.00 |
|
CHIN GUARD FOR LIBUS HELMET |
7.00 |
|
LEMBU RAIN CAPE |
3.00 |
|
BEIGE PANTS SIZE 34 OMBU |
1.00 |
|
WHITE WOMENS SHIRT SIZE XS |
26.00 |
|
WHITE WOMENS SHIRT SIZE S |
30.00 |
|
WHITE WOMENS SHIRT SIZE M |
4.00 |
|
WHITE WOMENS SHIRT SIZE L |
4.00 |
|
WHITE WOMENS SHIRT SIZE XL |
20.00 |
|
6009 3M MASK FILTER |
7.00 |
|
D:63.5MM JET NOZZLE |
40.00 |
|
PLACKA CERAMIC COMPOUND |
2.00 |
|
EPSON T6644 YELLOW CARTRIDGE |
2.00 |
|
EPSON T6643 MAGENTA CARTRIDGE |
2.00 |
|
EPSON T6642 CYAN CARTRIDGE |
50.00 |
|
2-POCKET LEGAL SIZE FOLTER |
49.00 |
|
2-POCKET A4-SIZE FOLDER |
1.00 |
|
YELLOW ROAD PAINT X 20L |
1.00 |
|
FLEETGUARD MOTOR OIL FILTER |
1.00 |
|
FLEETGUARD COOLANT FILTER |
9.00 |
|
80G PLOTTER ROLL |
116.00 |
|
3M 9332 PARTICLE MASK |
50.00 |
|
8X50 SPRING PINS |
51.00 |
|
3X20 SPRING PINS |
50.00 |
|
3.5X24 SPRING PINS |
51.00 |
|
4X24 SPRING PINS |
50.00 |
|
4.5X28 SPRING PINS |
50.00 |
|
5X30 SPRING PINS |
50.00 |
|
6X30 SPRING PINS |
50.00 |
|
6X40 SPRING PINS |
19.00 |
|
8 MM2 HOT MELT ADHESIVE |
100.00 |
|
1X2.5MM LIGHT BLUE SILIC. SINGLE-CORE CABLE |
126.00 |
|
1X2.5MM BROWN SILIC. SINGLE-CORE CABLE |
200.00 |
|
1X2.5MM RED SILIC. SINGLE-CORE CABLE |
100.00 |
|
1X2.5MM BLACK SILIC. SINGLE-CORE CABLE |
100.00 |
|
8MM EVA R/CLOTH HOSE |
2.00 |
|
2.7 MM X 221M STIHL MONOFILAMENT LINE |
6.00 |
|
8X14 FOREST PLASTIC MESH |
9.00 |
|
DOUBLE LIFE Y-CABLE L:1.5 M |
370.00 |
|
14X2 1/2 SELF-DRILLING SCREW |
4.00 |
|
PRIVE200/ KALLAY4003 LOCK |
1.00 |
|
CF1000 SECONDARY AIR FILTER |
1.00 |
|
65055105020B OIL FILTER |
1.00 |
|
65125035016 FUEL FILTER |
1.00 |
|
C20325/2 PRIM. AIR FILTER |
1.00 |
|
65083046005 PRIM. AIR FILTER |
8.00 |
|
19LED RECHARGEABLE FLASHLIGHT |
32.00 |
|
V/MCA RECHARGEABLE AA BATTERY |
18.00 |
|
NC AEA MODULE COD. M400 |
10.00 |
|
NA AEA MODULE COD. M500 |
26.00 |
|
VALVE HANDWHEEL |
2.00 |
|
2 1/2 HEADER |
4.00 |
|
RYL-JET HOSE |
4.00 |
|
CLAMP TIGHTENING WRENCH |
2.00 |
|
WHITE PIQUE SHIRT SIZE XXXXL |
4.00 |
|
GREY GLOSS CONVERTER X4L |
8.00 |
|
100-UN PACK DISPOSABLE NITRILE GLOVES |
2.00 |
|
1 BRONZE CHECK VALVE |
49.00 |
|
3M 501 RETAINER |
4.00 |
|
DBH 6710 RETAINER |
1.00 |
|
ADM-P 125 GEAR COUPLING |
1.00 |
|
ADM-P 150 GEAR COUPLING |
2.00 |
|
404-20236-4 SCREW |
10.00 |
|
404-22581-2 FERRULE |
10.00 |
|
1/4 POLYAMIDE |
5.00 |
|
CU-84-B + 2 CU-81-BI COUPLING |
2.00 |
|
CU-151-21 JOINT |
1.00 |
|
0-280KG/CM2 PRESSURE GAUGE |
2.00 |
|
TE CU-137-B CONNECTOR |
10.00 |
|
CU-83-B1 + CU-81-B1 CONNECTOR |
24.00 |
|
SAE100R1 X24M HOSE |
1.00 |
|
AGAA 318025 TERMINAL |
632.00 |
|
3/8X1.1/4 BELT BOLT |
200.00 |
|
3/8X1. 1/2 BELT BOLT |
Annex III List of Items at Reducción Plant
Number |
|
List of Items |
2 |
|
Peanut storage cells |
1 |
|
Reducción Plant Peanut plot |
1 |
|
Classified cleaning storage |
15 |
|
Conveyor belt |
1 |
|
Truck yard |
1 |
|
Supplementary facilities |
1 |
|
Car shed |
1 |
|
Workshop building, machine storage |
6 |
|
Peanut dryer |
13 |
|
Waterwheel elevator |
3 |
|
Pre-cleaning sieve |
1 |
|
Scale control building |
2 |
|
Peanut classifier |
1 |
|
Pre-cleaning shed |
3 |
|
Metal silos |
1 |
|
Waterwheel pump system |
1 |
|
Peanut unloader in boxes |
1 |
|
Dumping platform |
4 |
|
Classification hopper |
1 |
|
Dumping platform shed |
1 |
|
Shelled peanut sizer |
1 |
|
Centrifuge fans |
1 |
|
Collection, pre-cleaning and drying machine |
1 |
|
Laboratory equipment |
1 |
|
Maintenance equipment |
1 |
|
Metal cabin for boards |
Annex IV MARITIMA ARUBA Credit List
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
3,000.00 | |
MARITIMA MARUBA S.A. |
|
99Z000000000049 |
|
|
1,641.00 |
Total: |
|
|
|
USD |
55,641.00 |
Annex V List of Insurance Policies
Section |
|
Insurance Policy |
|
Insurer |
|
Unaccrued |
Environmental Insurance |
|
153701 |
|
TESTIMONlO Cia seguros |
|
57,629.32 |
Customs Bond |
|
131434 |
|
ASEGURADORA DE CREDITOS Y GARA |
|
20,222.26 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,074.65 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,081.86 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,110.49 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
4,114.79 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
1,663.38 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
7,016.23 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,484.08 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,446.29 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,232.26 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
2,447.21 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
466.44 |
Vehicle insurance |
|
152-9003432-02 |
|
MAPFRE |
|
1,766.79 |
All operating risks - Cereals |
|
400310 |
|
ZURICH Pilot PO |
|
358,182.68 |
All operating risks - Feeders |
|
577382 |
|
QBE Pilot PO |
|
162,779.99 |
Liability insurance - Cereals |
|
49125 |
|
CHUBB Pilot PO |
|
94,851.46 |
Liability insurance - Feeders |
|
49124 |
|
CHUBB Pilot PO |
|
69,742.94 |
Customs cell bond |
|
128513 |
|
ASEGURADORA DE CREDITOS Y GARA |
|
1,338.35 |
Group personal accident insurance |
|
1529827 |
|
LA MERIDIONAL CIA.ARG. |
|
680.67 |
Directors personal accident insurance |
|
1523212 |
|
LA MERIDIONAL CIA.ARG. |
|
604.46 |
Technical insurance |
|
5000-0708583-02 |
|
CAJA DE SEGUROS S.A. |
|
14,380.43 |
Technical insurance |
|
5000-0708583-02 End 1 |
|
CAJA DE SEGUROS S.A. |
|
9,998.47 |
|
|
|
|
Total excluding VAT |
|
821,315.48 |
Annex VI List of Transferred Personnel
Last Names |
|
First and Second Names |
|
DNI [National ID No.] |
ABAZ |
|
YAMILA |
|
29931272 |
ACOSTA |
|
ABEL |
|
24971383 |
ACTIS |
|
DAMIAN |
|
32596433 |
AGUIRRE |
|
ADRIAN EDUARDO |
|
32873772 |
ALEGRE |
|
RODOLFO ADRIAN |
|
25691302 |
ALMAZAN |
|
JUAN C. |
|
22534442 |
ANTELO |
|
MELINA ELIZABETH |
|
26275835 |
ARCE |
|
ARIEL |
|
25355833 |
ARCE |
|
HECTOR JAVIER |
|
29602450 |
ATTORRESI |
|
LUCAS |
|
35141372 |
AZULA |
|
VALERIA |
|
29320831 |
BARBERO |
|
GUSTAVO |
|
27268485 |
BECKER |
|
DIEGO |
|
24152077 |
BENITEZ |
|
ERIC BRIAN YAIR |
|
35559322 |
BENITEZ |
|
GUSTAVO MANUEL |
|
31410929 |
BUSTOS |
|
RUBEN ADRIAN |
|
35665908 |
CABRAL |
|
RUBEN |
|
13543396 |
CAMEJO |
|
DANIEL |
|
39685498 |
CANDAL |
|
ALEJANDRO JAVIER |
|
28716603 |
CARBONE |
|
CARLOS |
|
14559359 |
CARRILLO |
|
LUCIANO |
|
33849744 |
CARRIZO |
|
DAVID ALBERTO |
|
26906279 |
CASAS |
|
GONZALOJOSE |
|
30349725 |
CASTAAO |
|
AGUSTIN |
|
35666112 |
CASTELO |
|
GONZALO |
|
22244944 |
CHURRUARIN |
|
ANGELA VALERIA |
|
29286649 |
CLAUS |
|
GISELA SOLEDAD |
|
29668421 |
CLAUSER |
|
NICOLAS SALVADOR |
|
33397513 |
CORONEL |
|
MARIA LUCIANA |
|
28716928 |
CORREA |
|
CRISTIAN RICARDO |
|
26494814 |
CROZZA |
|
MONICA |
|
25445955 |
DA SILVA |
|
JULIO ARGENTINO |
|
28609171 |
DESAN |
|
JOAQUIN RUBEN |
|
20343085 |
DEDEK |
|
EDUARDO ENRIQUE |
|
24265623 |
DEROSIVICH |
|
ARIEL |
|
35405593 |
DIAZ |
|
ARIEL HUGO |
|
23775336 |
DIAZ |
|
PAULA JULIETA |
|
23647089 |
DOVALE |
|
ALEJANDRO DAMIAN |
|
29286456 |
DUCKART |
|
ANTONIO JONATAN |
|
36599412 |
EMERI |
|
MARIO |
|
20343010 |
ERBES |
|
ERIKA |
|
31399088 |
ESQUITIN |
|
JONATAN DAVID |
|
39285766 |
ESQUIVEL |
|
HECTOR HERNAN |
|
24247799 |
FAJARDO |
|
AGUSTIN |
|
27743083 |
FAJARDO |
|
ALEJANDRO |
|
17743956 |
FERNANDEZ |
|
CESAR MAXIMILIANO |
|
26494870 |
FERNANDEZ i |
|
GASTON |
|
22991882 |
FIORITO |
|
MIGUEL ERNANI |
|
28716766 |
FRANCHI |
|
GERMAN MAX1MILIANO |
|
32952992 |
GANBINI |
|
MATIAS |
|
30869336 |
GHIGLIONE |
|
URIEL ANDRES |
|
25943912 |
GIRARD |
|
GERARDO DANIEL |
|
92452457 |
GODOY |
|
GERARDO |
|
38297032 |
GOMEZ ARRIETA |
|
RENE OSCAR |
|
32018516 |
GONZALEZ |
|
DIEGO ALEJANDRO |
|
36493722 |
GONZALEZ |
|
ROBERTO |
|
24026200 |
GONZALEZ MEDEZ |
|
LUCAS MARTIN |
|
32769543 |
GRAMAJO |
|
JOSE MARIA |
|
22137209 |
GRENDELMEIER |
|
AUGUSTO WALTER OSCAR |
|
31709923 |
GUERRERO |
|
FLAVIO |
|
21499348 |
GUIDI |
|
PABLO MAXIMILIANO |
|
32018474 |
HERCEG |
|
WALTER |
|
22144784 |
KARABIN |
|
ROXANA |
|
30044388 |
KOHLER |
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FLORINDO FEDERICO |
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35731172 |
KROGER |
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CELESTE |
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27743062 |
LAZZARI |
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FACUNDO OSCAR |
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29805249 |
LOBATO |
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NATALIA |
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27215366 |
LOPEZ |
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HECTOR |
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11166692 |
LOPEZ |
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MARIA |
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23338766 |
LOSER |
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MARTIN |
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24438076 |
LUMBRERA |
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EMMANUEL |
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33057665 |
LUQUEZ |
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JOSIAS YAIR |
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35715671 |
MAGEN |
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MAURICIO EZEQUIEL |
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28942231 |
MANNARA |
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PABLO |
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36598679 |
MANOUKIAN |
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ROMINA ANTONELLA |
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33774983 |
MARTINEZ |
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DIEGO JAVIER |
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27739685 |
MARTINEZ |
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GERARDO |
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32252306 |
MARTINEZ |
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MARCELO MAXIMILIANO |
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37866186 |
MARTINEZ |
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MAXIMILIANO |
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31749781 |
MEDINA |
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GERMAN |
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32468359 |
MEDINA |
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LUCIANO DONATO |
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32018550 |
MELO |
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LEANDRO OMAR |
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30869382 |
MENDOZA |
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CRISTIAN |
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29602595 |
MERCURI |
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DAMIAN EZEQUIEL |
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31281739 |
MIAO |
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ERNESTO |
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23146349 |
MORATINOS |
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SEBASTIAN |
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24652556 |
MOREL |
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GUILLERMO |
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26624608 |
MORGAN |
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RUBEN |
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17107273 |
MOSTEIRO |
|
JORGE MIGUEL |
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20490671 |
NITSCHE |
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DAVID |
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29556738 |
NIZ |
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YAMIL GERMAN IGNACIO |
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34546794 |
OBERTI GAITE |
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AGUSTIN MATIAS |
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34109637 |
PAGNANELLI |
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EZEQUIEL |
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27743247 |
PEDERNERA |
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SABRINA |
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28098951 |
PEIRANO |
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SAULEMANUEL |
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31912800 |
PEREZ |
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DANIEL ALBERTO |
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27635237 |
PEREZ TREVESET |
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PABLO |
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27787908 |
PILLWEIN |
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WALTER |
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22581958 |
PINTO |
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MARTIN |
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24247587 |
PIAEYRO |
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LUCAS RICARDO |
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35065968 |
PIAON |
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HERNAN JEREMIAS |
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34174046 |
POSADA |
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CRISTIAN |
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23673205 |
RAMIREZ |
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GERARDO RAFAEL |
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28542621 |
RAMIREZ |
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JUAN CARLOS |
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28063946 |
RAMOS |
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NATALIA GABRIELA |
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25250088 |
REGINI |
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JUAN DOMINGO |
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24099675 |
RICO GOMEZ |
|
ANDRES OSVALDO |
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31283840 |
RODRIGUEZ |
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FEDERICO NICOLAS |
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35120433 |
RODRIGUEZ |
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MARIO RUBEN |
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35981732 |
ROJAS |
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LUIS HERNAN |
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33849770 |
ROLDAN |
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MATIAS |
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30418574 |
ROMERO |
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JOSE PABLO |
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23908061 |
ROMERO |
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YANINA SOLEDAD |
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29167773 |
SAAVEDRA CELSO |
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DANIEL |
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23109319 |
SANCHEZ |
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CRISTIAN |
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27264925 |
SANCHEZ |
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LEANDRA |
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25694598 |
SANTA |
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CRUZ PABLO |
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30350014 |
SCIBONA |
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ANTONELA |
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31039865 |
SENA |
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JUAN MIGUEL |
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33651709 |
SOUSA |
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GEORGINA |
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27264754 |
SPIRITO |
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JUAN EMMANUEL |
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32953352 |
STIVANELLO |
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ROCIO CRISTINA |
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32269843 |
SUAREZ |
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JUAN JORGE |
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13420280 |
TAVELLA |
|
GUILLERMO HORACIO |
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16304544 |
TEJERINA |
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SANTIAGO |
|
92453799 |
TERESZCZUK |
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ALEJANDRO |
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24916948 |
TIZION |
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OSCAR |
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18477754 |
TOMASSI |
|
DAVID ROBERTO |
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25355231 |
TORRES |
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ADRIAN LUJAN JESUS |
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32713650 |
TORRES |
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ANDRES EDUARDO |
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30418759 |
TORRES FERNANDEZ |
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NESTOR |
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93729814 |
TROYA |
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JUAN |
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26624438 |
TUNIK |
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PABLO HERNAN |
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25024162 |
VALDEZ |
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ANDRES |
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26268166 |
VALDEZ |
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MAYRA GISELLE |
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35666452 |
VALDIVIA |
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JAVIER EDUARDO |
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24938179 |
VELAZQUEZ |
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JAVIER GONZALO |
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33365356 |
VERON |
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MATIAS RUBEN |
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37675506 |
VERON |
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NARCISO ALBERTO |
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35666131 |
VILLALBA |
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OSCAR ALEXIS |
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30966567 |
VIVIANI |
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FATIMA DANIELA |
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32722427 |
VURGOS |
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FEDERICO |
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36851796 |
ZABALA |
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MARCELO ADRIAN |
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22739886 |
ZABEL |
|
FEDERICO LUIS |
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24561099 |
ZAMORA |
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NICOLAS |
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27111310 |
Annex VII Employment Contract Assignment Model
This Employment Contract Assignment is executed by and between [blank], hereinafter referred to as THE ASSIGNOR, represented herein by Mr. [blank], with DNI [National ID Document] No. [blank], establishing its registered address for this purpose at [blank] in the city of [blank], as party of the first part; and [blank] hereinafter referred to as THE ASSIGNEE, represented herein by Mr.
[blank], with DNI No. [blank], establishing its registered address for this purpose at [blank] in the city of [blank], and Mr. [blank], with DNI No. [blank], with residential address at [blank], in the city of [blank], hereinafter referred to as THE ASSIGNED, entirely under the terms of Section 229 of Law 20,744 and its amendments, and shall be subject to the following clauses:
ONE: THE ASSIGNOR hereby assigns to THE ASSIGNEE, free of charge, the Employment Contract that it entered into in its capacity as an employer with THE ASSIGNED as of [blank]. THE ASSIGNED shall work as [blank] as of the month of [blank], [blank] and shall earn a salary of $[blank], under the following category and according to the following professional qualification:
Category: [blank]
Professional Qualification: [blank]
Observations: [blank]
TWO: THE ASSIGNEE expressly accepts the Assignment of Mr. [blank]s Employment Contract as of the month of [blank], [blank] for an indefinite time period.
THREE: THE ASSIGNEE undertakes by this assignment to acknowledge the seniority of THE ASSIGNED under his contractual employment relationship with THE ASSIGNOR and pursuant to Clause ONE, as well as the rights granted thereunder, and shall assume its responsibilities as an employer under applicable labor regulations, as of the execution of this instrument.
FOUR: Mr. [blank], employee of THE ASSIGNOR, hereby expressly states its full agreement with the Assignment of its Employment Contract to THE ASSIGNEE, so that as of the execution hereof, the latter shall have all of the rights, duties and guarantees established by the Employment Contract Law and must meet all the obligations it has assumed with respect to THE ASSIGNOR.
FIVE: This agreement shall become effective as of [blank] [blank], [blank] ([blank]/[blank]/[blank])
In witness whereof, the parties have signed three identical counterparts, in [blank], on [blank] [blank], [blank].
THE ASSIGNOR [blank]
THE ASSIGNED [blank]
THE ASSIGNEE [blank]
Annex VIII Copy of the Bank Agreement Executed by and between MOLCA and DEG, the Debt of Which Is Assumed by MC in Payment of the Agreed Price
[There is a page in English.]
[There is an illegible signature on the bottom margin of each page of the original document.]
I DO HEREBY CERTIFY THAT THE FOREGOING IS, TO THE BEST OF MY KNOWLEDGE, A TRUE AND ACCURATE TRANSLATION INTO ENGLISH (60 PAGES) OF THE DOCUMENT WRITTEN IN SPANISH
ATTACHED HERETO AND TO WHICH I REFER. IN WITNESS THEREOF I SIGN AND SEAL THIS DOCUMENT IN THE CITY OF BUENOS AIRES, ARGENTINA, ON THE 1stDAY OF THE MONTH OF MAY OF 2017.
POR EL PRESENTE CERTIFICO Y DOY FE QUE LA QUE ANTECEDE ES A MI MEJOR SABER Y ENTENDER, UNA TRADUCCIÓN FIEL AL INGLÉS (60 PÁGINAS) DEL DOCUMENTO ADJUNTO REDACTADO EN ESPAÑOL, QUE HE TENIDO A LA VISTA Y AL CUAL ME REMITO. Y PARA QUE CONSTE, FIRMO Y SELLO EN LA CIUDAD AUTÓNOMA DE BUENOS AIRES, ARGENTINA, AL 1er DÍA DEL MES DE MAYO DE 2017.
Exhibit 10.5
TRADUCCIÓN PÚBLICA/CERTIFIED TRANSLATION
NON-RESIDENTIAL PROPERTY LEASE AGREEMENT WITH FACILITIES, MACHINERY, EQUIPMENT, FITTINGS, FURNITURE AND FIXTURES, ENTERED INTO BY S.A. MOINHO DA BAHIA, LESSOR, ON ONE PART, AND MOINHO CANUELAS LTDA., LESSEE, ON THE OTHER PART, BY ISSUANCE OF A SURETY BOND, UNDER THE FOLLOWING TERMS AND CONDITIONS:
I. CONTRACTING PARTIES.
On one part, as LESSOR, S/A MOINHO DA BAHIA, a company located in the township of Salvador, Bahia State, domiciled at 863 Estados Unidos Avenue, duly registered with the CNPJ [Register of Companies] under no. 33,146,804/0001-52, hereat represented by its directors, Messrs. DIONÍSIO GOMES SANTANA; Brazilian, widower, merchant, domiciled at Ariosvaldo Pereira Lima, block 08, house 52, Stiep, holder of RG [identity card] no. 00955281-21-SSP/BA [Public Security Secretary/Bahia State] and holder of CPF/MF [Register of Individuals/Finance Department] under no. 030,581,075-87; and EDVALDO JOSÉ DE SOUZA, Brazilian, married, merchant, domiciled at 30 Madalena Paraguassu, Pau Miúdo, holder of RG no. 00283898-24-SSP/BA and holder of CPF/MF under no. 019,554,115-49, domiciled in this City of Salvador, Bahia;
On the other part, as LESSEE, MOINHO CANUELAS LTDA., a Brazilian private limited liability company, located in the City of Cabedelo, Paraíba State, at (w/n) Presidente João Pessoa, Warehouse no. 2, Cabedelo Port, duly registered with the CNPJ under no. 03,763,491/0001-10, hereat represented by its attorney-at-law, CARLOS ADRIANO NAVILLI, Argentinean, married, businessman, domiciled in the City of São Paulo, State of São Paulo, at 545 São Bento, 2nd floor, mezzanines 1, 2 and 13, holder of Foreigners Identity Card RNE no. V314887-5-SE/DPMAF/SP, holder of Argentine passport no. 12,657,137 and registered with the CPF under no. 227,611,978-01;
II. GUARANTOR.
MOLINO CAÑUELAS S.A.C.I.F.I.A. hereby appears as guarantor of this agreement, a company duly incorporated and validly existing according to the laws of the Republic of Argentina, located at 160 J. F. Kennedy, City of Cañuelas, Province of Buenos Aires, Argentina, in order to guarantee the terms hereof, and signs this instrument solely to honor any unpaid rents and contractual breaches by LESSEE, hereat represented by its attorney-at-law, CARLOS ADRIANO NAVILLI, Argentinean, married, businessman, domiciled in the City of São Paulo, State of São Paulo, at 545 São Bento, 2nd floor, mezzanines 1, 2 and 13, holder of Foreigners Identity Card RNE no. V314887-5-
SE/DPMAF/SP [Foreigners Service/Marine, Airport and Border Police Department/São Paulo], holder of Argentine passport no. 12,657,137, and registered with the CPF under no. 227,611,978-01;
Therefore, according to the provisions set forth in sections 1,144 to 1,149 of the Civil Code, the parties agree to execute this NON-RESIDENTIAL PROPERTY LEASE AGREEMENT, hereafter referred to as the AGREEMENT, with its facilities, machinery, equipment, fittings, furniture, and fixtures, which shall be governed by Act No. 8,245, dated October 18, 1991, sections 51 et seq. (Non-Residential Lease), as supplemented by Act No. 6404/76 and other applicable provisions, and by the following terms and conditions:
ARTICLE FIRST - SUBJECT MATTER.
LESSOR is the lawful owner of the real estate (Exhibit I - Registration), which is settled in an area of 5,075.90 square meters and featured by the limits and boundaries of its location, between França and Estados Unidos Avenues, and Suécia St., in the neighborhood of Pilar, urban area of the City of Salvador, State of Bahia, as well as of its respective facilities, machinery, equipment, furniture, and fixtures (Exhibit II), which shall be classified in the referred Exhibit II with the following status: i) in proper conditions for use; ii) incomplete machines; iii) repair or maintenance required; and iv) useless. Therefore, the subject matter of this agreement includes:
1. The real estate under valuation (Exhibit I), registered under no. 19,011 with Real Estate Title Register No. 4 of Salvador, Bahia, as well as the certificate issued on 01/24/2000 by Real Estate Title Register No. 2 of Salvador, Bahia, and;
2. Any facilities, machinery, equipment, furniture, and fixtures included therein, which are part of it, will be hereinafter referred to as the INDUSTRIAL PLANT (Exhibit II), owned by LESSOR, with the following liens appearing in the referred registration: under no. 01, dated August 14, 1985, filed under no. 831 of the Auxiliary Register, the owner granted DESENBANCO BANCO DE DESENVOLVIMENTO DO ESTADO DA BAHIA S/A, as first priority mortgage, the referred real estate as security for the loan granted to it, for the value of BRL 1,553,411.54, due on August 15, 2000; under no. 02, dated August 1995, Industrial Credit Note No. 95/12, issued on July 26, 1995, filed under no. 832 of the Auxiliary Register, whereby the owner granted DESENBANCO BANCO DE DESENVOLVIMENTO DO ESTADO DA BAHIA S/A, as second priority mortgage, the real estate subject to this certificate, as security for the loan granted to it, for the value of BRL 1,325,138.80, due on July 15, 2001; under no. 03, dated July 29, 1998, the re-ratification addendum dated July 12, 1998, in order to rectify the note that originated the R.2 of this certificate, and to
auxiliary register no. 832; under no. 04, the rectification and ratification addendum to industrial credit note no. 95/12, dated January 7, 1999, under no. V.5, the rectification and ratification addendum dated 02/12/1998 of industrial credit note no. 95/19, subject to the R.l; and, furthermore, under no. AV.6, the rectification and ratification addendum dated 01/07/1999 of industrial credit note no. 95/19, subject of the R.1, and any other liens appearing on the referred registration.
3. The INDUSTRIAL PLANT described above shall be delivered by LESSOR to LESSEE in the term of up to 120 (one hundred and twenty) days as from the execution date hereof, free and clear of any goods, occupants, tax registrations, and documents.
a) LESSEE expressly acknowledges the existence of a non-residential lease agreement executed with VICUNHA TELECOMUNICAÇÕES LTDA., on February 19, 1999, effective until February 1, 2013, which is liable for disposing of the area and goods leased by LESSOR, under the terms and conditions of the referred lease agreement, which is made part of this AGREEMENT as Exhibit III;
b) It is expressly set forth and authorized that, if LESSEE, in its sole discretion, pays any amount due by LESSOR, any values paid shall be set off by the values owed to it as monthly rent, as provided for in Article Third.
4. For the purposes of the provisions of items 1.1 and 1.2 of this Article, upon delivery of the INDUSTRIAL PLANT, LESSOR and LESSEE shall sign an Industrial Plant Delivery Receipt Sheet.
PARAGRAPH FIRST.
Exhibits I and II are part of this agreement for all legal purposes, and their contents represent the express declaration of delivery, existence and check of goods listed therein, their state of preservation, receipt, and liability taken over by LESSEE for its custody, safety, preservation, maintenance, and other covenants.
PARAGRAPH SECOND.
At its own expense, LESSEE shall be entitled to make any changes, reworks and refurbishments to the leased goods; however, any changes implying amendments to the original project and to the features of its main facilities shall be previously authorized in writing by LESSOR.
PARAGRAPH THIRD.
LESSEE represents that it exclusively leases the goods included in Exhibits I and II to perform the industrial activities provided for under its Articles of Association, and shall be entitled to place any machinery, equipment, fittings, properties, stock, fixtures, etc. of its
own in the facilities of the leased real estate, as well as to remove them upon or before termination of this agreement, at any time it may deem convenient.
PARAGRAPH FOURTH.
LESSEE shall be entitled to increase the production and storage capacity of the INDUSTRIAL PLANT, which is hereby authorized, without need of any further actions.
ARTICLE SECOND - LEASE TERM.
The LEASE TERM shall be of 12 (twelve) years as from delivery date of the INDUSTRIAL PLANT, free and clear of any goods, occupants, tax registrations, and documents that are not part of this lease, and shall end 144 (one hundred and forty-four) months after receipt of the INDUSTRIAL PLANT by LESSEE. Upon termination, LESSEE undertakes to return it as received, equally free and clear of any goods, occupants, and objects that are not part of this lease, irrespective of any judicial notice or summons.
PARAGRAPH FIRST.
Upon termination, the lease term may be renewed for an equal period of 12 (twelve) years, provided that LESSEE represents its intention in writing at least 180 (one hundred and eighty) days before the end of term, according to the following:
1. If LESSEE fails to return the INDUSTRIAL PLANT at the end of the term described in Article Second, or after the extension of the term set forth therein, while in possession of it, it shall pay a value equal to the last monthly rent readjusted under the terms of Paragraph First of Article Third hereof.
2. During the first effective year of this AGREEMENT, LESSEE shall be entitled to notify it and deem it terminated, according to the following terms:
a) By previous notice of 60 (sixty) days with no liens or penalties;
b) With no previous notice, through the payment of a fine equal to one monthly rent and a half effective at the time of termination of the AGREEMENT.
c) As from the second effective year of the AGREEMENT and until the end of the lease term, LESSEE shall be entitled to notify it and deem it terminated, according to the following terms:
d) By previous notice of 90 (ninety) days with no liens or penalties;
e) With no previous notice, through the payment of a fine equal to three monthly rents effective at the time of termination of the AGREEMENT.
f) If the agreement termination is not caused on the fault of LESSEE, LESSOR undertakes to promptly return LESSEE the advanced rent value provided for hereunder, which has not already been duly set off, and to pay a fine equal to a six-month rent, effective at the time
of occurrence of the fact, notwithstanding any claim for damages and loss of profits, in connection with investments and refurbishments done and not refunded, and employment agreement terminations.
g) In the event the agreement is terminated on the fault of LESSEE, with values to be compensated for investments and improvements, the Parties agree that they shall seek a mutual and friendly way to adjust the values and the way of payment.
3. This AGREEMENT may be terminated at any time by LESSOR, in case of delay in rent payments and other charges agreed hereunder, for a period over 60 (sixty) days.
ARTICLE THIRD - VALUE OF MONTHLY RENT AND READJUSTMENTS.
The monthly rent shall be of BRL 180,000.00 (one hundred thousand and eighty reais), which LESSEE undertakes to pay on time until the 5th (fifth) day of the month after expiration, payable as per the instructions to be given by LESSOR afterwards, or by the legally authorized attorney-in-fact.
PARAGRAPH FIRST.
In the first 24 (twenty-four) effective months of the AGREEMENT, the monthly value owed by LESSEE to LESSOR shall be of BRL 180,000.00 (one hundred and eighty thousand reais), thereafter being readjusted on an annual basis, based on the variation of the IGP-M (General Price Index-Market) of Fundação Getúlio Vargas in the term of 12 (twelve) months prior to the readjustment determination. If the IGP-M variation of the last twelve months, this is, from the thirteenth to the twenty fourth month of the agreement, is over 15% (fifteen percent), LESSEE shall pay a one-time fifty percent of such variation on the twenty-fifth month. If the index is terminated and replaced, the substitute index shall be applied therefor.
PARAGRAPH SECOND.
Delay in payment of values agreed hereunder shall entitle LESSOR to collect a compensatory fine of 2% (two percent) on the debt balance due, adjusted by the General Price Index-Market (IGP-M) of Fundação Getúlio Vargas, plus interest of 1% (one percent) on a monthly basis, and attorneys fees, irrespective of any court action. In the latter case, fees shall only be due as from collection by the authorized lawyer.
PARAGRAPH THIRD.
At any time and at its sole discretion, LESSEE shall be entitled to pay rents in advance, which shall be set off during the effectiveness of this AGREEMENT at any time deemed convenient, and therefore, determine the respective months in which the referred set off shall be made.
PARAGRAPH FOURTH.
LESSEE is hereby authorized to withhold 33% (thirty-three percent) of the monthly rent, for the purpose of creating a security fund for risks of investments described in the articles hereunder. The Parties agree to set forth rules for the administration and use of such fund resources in a separate article.
ARTICLE FOURTH - TAXES, RATES AND CONTRIBUTIONS.
Taxes, rates, contributions, water and electricity bills applicable to the real estate, as from receipt of the INDUSTRIAL PLANT, as well as any other that may be applicable in the future during the effectiveness of the AGREEMENT, shall be exclusively borne by LESSEE, who undertakes to have the payment receipts thereof available in the pertinent months, on a monthly basis, for eventual controls by LESSOR.
PARAGRAPH FIRST.
During the effectiveness of this agreement, LESSEE shall be solely liable for paying all municipal, state, and federal taxes, as well as any social charges, FGTS [Guarantee Fund for Length of Service], payroll, and any other charges that may be applicable to the subject matter of the rent, at the time or in the future, as described in Article First.
PARAGRAPH SECOND.
LESSEE shall be released from any payment regarding any taxes or contributions applicable to the real estate with taxable events prior to the date of receipt of the INDUSTRIAL PLANT.
PARAGRAPH THIRD.
LESSEE shall be entitled to hire any personnel dismissed by LESSOR, and shall not be liable for any prior employment relationship, in connection with the payment of social, labor, security, or any other charges on such personnel for the previous period. If any payment is required from it by reason of a claim declared res judicata whose payment is unavoidable, the value disbursed shall be deducted from the rents, which is hereby authorized by LESSOR.
ARTICLE FIFTH - DELIVERY, POSSESSION AND INSPECTION OF THE REAL ESTATE.
The delivery of the INDUSTRIAL PLANT to LESSEE under the terms of Article First hereunder, except for the classification therein provided, shall be made after its inspection, with a detailed description of the conditions in which it will be delivered, under the INDUSTRIAL PLANT DELIVERY AND POSSESSION TRANSMISSION SHEET to be
signed by the PARTIES, and may be objected to any of them and/or third parties, in the event of any existing attachment in the INDUSTRIAL PLANT.
PARAGRAPH FIRST.
If LESSEE, in its sole discretion, pays any amount due by LESSOR, it is expressly set forth that any values paid shall be set off by the values owed as monthly rent to LESSOR. Any values that may be advanced shall be updated by the General Price Index-Market of Fundação Getúlio Vargas (IGP-M) as of the date of actual set-off.
PARAGRAPH SECOND.
LESSOR undertakes to obtain from DESENBAHIA - AGÊNCIA DE FOMENTO DO ESTADO DA BAHIA S/A, successor of DESENBANCO - BANCO DE DESENVOLVIMENTO DO ESTADO DA BAHIA, its express consent to the terms of this Non-Residential Lease Agreement, as well as to obtain the formal commitment of not foreclosing the mortgages, or doing any other legal act that may cause a continuation resolution or operation impediment of the INDUSTRIAL PLANT leased hereunder from such agency.
PARAGRAPH THIRD.
LESSOR hereby authorizes LESSEE to use an installment of the monthly rent owed to it, in a percentage of up to 40% (forty percent), to pay DESENBAHIA - AGÊNCIA DE FOMENTO DO ESTADO DA BAHIA S/A, as mortgagor, which value shall be recognized as part of the total provided for in Article Third, to all legal effects.
ARTICLE SIXTH - SPECIAL PROVISIONS.
1. LESSEE shall not be entitled, without the prior written authorization by LESSOR, to transfer, sublease, or assign, the lease to third parties.
2. Any tolerance by the parties regarding the fulfillment of the obligations agreed shall be their sole freedom, and shall not entitle the novation provided in the Brazilian Civil Code; therefore, the articles of this agreement shall not be applicable, which shall be effective as agreed and as if no favor had been given.
3. During the effectiveness of this agreement, LESSEE shall be liable for any preventive and corrective maintenance of machinery, equipment, fittings, furniture, and fixtures. Except for the replacement of any parts or fittings of the equipment of Diagram C, listed in Exhibit H, for which LESSOR shall be fully liable, seeking the initial monthly production of 5,500 tons/month (five thousand five hundred tons) of wheat milling. This item shall be deemed as a condition precedent of this instrument.
4. LESSEE grants LESSOR the right to inspect the INDUSTRIAL PLANT leased, at its request, on a day and time previously agreed, and such shall accept the inspection request by LESSEE for any legal purpose.
5. During the whole effective term of this agreement, LESSOR shall ensure LESSEE the pacific use and enjoyment of the INDUSTRIAL PLANT. Any events that may threaten or jeopardize the use and enjoyment of the INDUSTRIAL PLANT by LESSEE shall be solved by LESSOR as soon as possible, and mutually agreed by the PARTIES, under the penalty of LESSOR being held liable for damages and loss of profits actually occurred. LESSOR shall pay a fine equal to two daily rents, in case the INDUSTRIAL PLANT is interrupted on its fault. Therefore, the rent effective on the month of the event, divided into 30 (thirty) days, shall be deemed as daily rent. Any discount of rents hereby authorized shall be made when the next rent is due.
6. LESSEE represents that it leases the referred machinery, equipment, fittings, furniture, and fixtures exclusively for business purposes. LESSEE shall not be entitled to sublease any of them, in whole or in part, and shall keep them within the real estate leased.
7. LESSOR expressly authorizes LESSEE to do any useful and/or necessary works and improvements at the INDUSTRIAL PLANT leased, which, if cannot be removed upon termination of the AGREEMENT, shall be part of it and shall be compensated to LESSEE. If the whole term of the agreement is completed, no compensation shall be made.
8. Except for any works regarding the security of the INDUSTRIAL PLANT, corresponding to LESSOR, LESSEE undertakes to do any other works conducive to keep it in good state of hygiene, cleaning and security with the sanitation, lighting, and any other fittings in proper state of repair and operation, in order to return them as they were, upon termination of this AGREEMENT, except for wear and tear resulting from the normal and natural lapse of time.
9. LESSOR shall be liable, as a protection measure of the INDUSTRIAL PLANT, for hiring a renowned insurance company chosen by it to execute a fire insurance policy, for the whole lease term, paying the corresponding premiums, whose beneficiary shall be LESSOR, except for the compensation that may be applicable to the goods and interests of LESSEE.
10. The insurance value shall be the one specified in a valuation prepared by the insurance company chosen or by a company specialized in valuations, and its value shall be adjusted on an annual basis according to the variation of the General Price Index-Market (IGP-M) of Fundação Getúlio Vargas. In the event of termination and/or non-
disclosure of such index, the General Price Index-Industry (IGP-DI) of Fundação Getúlio Vargas shall be used. If such other index is also terminated, and/or is no longer disclosed, the PARTIES, by mutual agreement, shall provide for a new index specifying the actual devaluation of currency occurred in the period and whose application is accepted by the pertinent legislation and regulations.
11. LESSEE shall take any necessary actions to obtain all authorizations, licenses and permits from municipal, state and federal agencies necessary for the operation of the INDUSTRIAL PLANT. Therefore, LESSOR shall provide LESSEE with a copy of the documentation and any other information necessary to obtain such authorizations, licenses and permits, including architectonic and engineering plans and surveys.
12. LESSEE is granted the right to assign, transfer and/or sublease, in whole or in part, the INDUSTRIAL PLANT, subject to this AGREEMENT, to any controlled, related and/or associated companies, which are part of the same group of companies of LESSEE.
13. Any notices, notifications, and communications regarding this AGREEMENT shall be delivered by company register, or by a registered letter with return receipt, at the addresses specified in the identification of the PARTIES.
14. LESSEE is recognized the preemptive right to purchase the INDUSTRIAL PLANT herein leased, in the same conditions granted to third parties, as provided in section 27 and following sections of Act 8,245 dated 11/11/1991 (Non-Residential Lease), and due information on the business through notice shall be given by LESSOR, which shall contain all transaction terms and, specially, the price, the way of payment, the existence of mortgages, as well as the place and time in which the pertinent documentation may be examined. Therefore, the term for LESSEE to exercise the purchase option shall be of at least 60 (sixty) days.
15. LESSOR assumes the liability to convene an Extraordinary General Meeting for the next eight days, exclusively for such purpose, in order to approve the execution of this AGREEMENT, which is signed ad referendum.
16. LESSOR shall offer any necessary assistance to obtain the federal authorization for the operation the INDUSTRIAL PLANTs silos as bonded warehouses.
17. The Parties agree that the first payment of the rent value shall be paid fully by LESSOR, without any withholdings provided hereunder.
ARTICLE SEVENTH - GENERAL PROVISIONS.
1. In case the INDUSTRIAL PLANT subject to this AGREEMENT is sold to third parties, LESSOR undertakes to fulfill the obligations herein agreed, and binds itself to cause the eventual purchaser fulfill any terms and conditions of this AGREEMENT.
2. For the purposes of the provision of item 1 above, this AGREEMENT shall be filed with the pertinent Real Estate Title Register along with the real estate registration.
3. If the INDUSTRIAL PLANT herein leased is expropriated, LESSOR shall be released from all the terms of this AGREEMENT, being LESSEE entitled to obtain any applicable compensation from the expropriating party.
4. This AGREEMENT binds the PARTIES and their successors of any kind whatsoever, under all the terms and conditions herein provided.
ARTICLE EIGHTH - CONDITIONS PRECEDENT.
The following conditions and obligations of LESSOR are conditions precedent for full operation of law, without which this instrument will not be valid, under the terms of section 125 of the Brazilian Civil Code, which shall be cumulative, and shall not grant any rights to LESSOR nor to LESSEE, having no effects between them for all legal purposes, and there being nothing due at any capacity whatsoever, in the term of up to 120 (one hundred and twenty) days as from the execution of this instrument:
1. The INDUSTRIAL PLANT subject to this AGREEMENT shall be delivered to LESSEE in the term of up to 120 (one hundred and twenty) days as from the execution date of this instrument, free and clear of any goods, occupants, and liens other than those expressly mentioned in Article First hereof, necessary for LESSEE to operate the referred INDUSTRIAL PLANT on an appropriate basis.
2. The express consent to any terms of this agreement shall be obtained from DESENBAHIA - AGÊNCIA DE FOMENTO DO ESTADO DA BAHIA S/A, as well as the suspension of any foreclosures against LESSOR.
3. Any tax benefits shall be obtained by LESSEE to reduce the calculation base and financing of the ICMS [VAT] from Entities and Agencies of the State of Bahia.
4. LESSOR shall refinance or settle any tax debts owed to the State of Bahia, and any debts owed to DESENBAHIA - AGÊNCIA DE FOMENTO DO ESTADO DA BAHIA S/A in order to avoid the foreclosure or the cancelation of operations of the INDUSTRIAL PLANT.
5. Any operation permits, licenses and other registrations required for the full operation of the INDUSTRIAL PLANT shall be obtained, by reason of any impediment caused by deficiencies in LESSORs registrations.
6. All utility bills shall be settled in order to enable LESSEE to occupy the INDUSTRIAL PLANT on an appropriate basis.
7. The termination of the required period of time to set the INDUSTRIAL PLANT in motion, according to article sixth, item three, is also deemed as a condition precedent.
SOLE PARAGRAPH.
Failure by LESSEE to comply with any of the conditions precedent herein provided shall not be deemed as a cause for termination.
ARTICLE NINTH - ARBITRATION.
1. Any litigation, dispute, claim resulting from, or related to, this AGREEMENT, or the breach, termination or its validity, shall be finally solved by arbitration. The arbitration shall be conducted by the International Chamber of Commerce (ICC), according to the ICC Rules effective at the time of the arbitration, except for the ones amended herein or by mutual agreement between the parties. The arbitration venue shall be in the City of Salvador, Bahia, Brazil, and shall be conducted in the official language.
2. The arbitration shall be performed by three arbitrators. The party requesting the arbitration (hereinafter, the Requesting Party) shall appoint an arbitrator in its request for arbitration (hereinafter, the Request). The other party (hereinafter, the Requested Party) shall appoint its arbitrator within 30 days as from receipt of the Request, and shall notify it to the Requesting Party in writing. If, in the term of 30 days as from receipt of the Request by the Requested Party, no party has appointed its arbitrator, the ICC shall appoint one of them. The first two arbitrators appointed according to this provision shall appoint a third arbitrator within 30 days after the Requested Party notifies the Requesting Party of its appointment, or, if one party fails to make the referred appointment, within 30 days after the ICC has notified the parties, and any arbitrator already appointed, to notify them of the appointment of an arbitrator on behalf of the defaulting party. Upon acceptance of the appointment by the third arbitrator, both appointing arbitrators shall promptly notify it to the parties. If the first two arbitrators fail to appoint a third one, or fail to notify the parties as provided within the term specified above, the ICC shall appoint a third arbitrator and shall notify such appointment to the parties. The third arbitrator shall act as President of the Tribunal.
3. The award shall be issued in writing, final, and binding upon the Parties, and shall include its grounds. The award may include a decision regarding legal expenses, including attorneys fees and disbursements.
4. The Court of the State of Bahia has jurisdiction to enforce the award, as well as any injunctions or measures that may be ordered during the arbitration. However, the Parties acknowledge that, before the arbitration proceeding described herein is started, and solely until the referred proceeding starts, they are entitled to submit any request for injunctions or other measures related to the disputes arising from this Agreement before the Court of the State of Bahia.
ARTICLE NINTH - AGREEMENT VENUE.
The Parties choose the venue of the City of Salvador, Bahia, excluding any other whatever privileged it may be, to solve eventual doubts resulting from this AGREEMENT, which may not be solved in a friendly manner, and binds the parties to its full performance, per se, and their successors and assigns in any capacity.
IN WITNESS WHEREOF, the PARTIES execute this instrument in 3 (three) identical copies to a sole legal effect, before two witnesses signing below.
Salvador, June 14, 2005.
LESSOR: [Signatures] S/A MOINHO DA BAHIA
LESSEE: [Signature] MOINHO CANUELAS LTDA.
GUARANTOR: [Signature] MOLINO CAÑUELAS LTDA.
WITNESSES: 1. [Signature]. 2. [Blank] [Signatures]
[Seal:] Notarial Register No. 1. I certify the signature of Alonso José Souza, Salvador, June 28, 2005. I attest [signature]. Authorized Notary Public.
[Seal:] Real Estate Title Register No. 4, Salvador, Bahia.
[Seal:] I certify the signature of Carlos Adriano Navilli, Salvador, June 15, 2005. I attest [signature]. Nilza Osorio Pimentel Dantas Fontes. Substitute Notary Public.
[Seal:] Notarial Register No. 5. It is a true copy of the original document I had before me, Salvador, July 6, 2011. I attest [signature]. Joselita Nascimento da Costa. Notary Public.
THIS IS A TRUE TRANSLATION into English of the document attached issued in Portuguese, I had before me, I attest, in the Autonomous City of Buenos Aires, on April 21, 2017.
ES TRADUCCIÓN FIEL al idioma inglés del documento adjunto redactado en idioma portugués, que tuve a la vista y al cual me remito, en la Ciudad Autónoma de Buenos Aires, el 21 de abril de 2017.
Exhibit 10.6
TRADUCCIÓN PÚBLICA
[El documento es un original que consta de 1 página]
Cañuelas, December 16, 2015
President of MOLCA S.A.
Attn: Nicolás Mihanovich
Re: Irrevocable Purchase Offer
Carlos Adriano Navilli, D.N.I. [National Identity Document No.] 12,657,137, in my capacity as proxy of MOLINO CAÑUELAS S.A.C.I.F.I.A. I would like to inform MOLCA S.A. of our acceptance of the Irrevocable Purchase Offer dated December 15, 2015.
[illegible signature and stamp:] Molino Cañuelas S.A.C.I.F.I.A. Proxy.
Proxy
I DO HEREBY CERTIFY THAT THE FOREGOING IS, TO THE BEST OF MY KNOWLEDGE, A TRUE AND ACCURATE TRANSLATION INTO ENGLISH (1 PAGE) OF THE DOCUMENT WRITTEN IN SPANISH ATTACHED HERETO AND TO WHICH I REFER. IN WITNESS THEREOF I SIGN AND SEAL THIS DOCUMENT IN THE CITY OF BUENOS AIRES, ARGENTINA, ON THE 4 DAY OF THE MONTH OF MAY OF 2017.
POR EL PRESENTE CERTIFICO Y DOY FE QUE LA QUE ANTECEDE ES A MI MEJOR SABER Y ENTENDER, UNA TRADUCCIÓN FIEL AL INGLÉS (1 PÁGINA) DEL DOCUMENTO ADJUNTO REDACTADO EN ESPAÑOL, QUE HE TENIDO A LA VISTA Y AL CUAL ME REMITO. Y PARA QUE CONSTE, FIRMO Y SELLO EN LA CIUDAD AUTÓNOMA DE BUENOS AIRES, ARGENTINA, A LOS 4 DÍAS DEL MES DE MAYO DE 2017.
TRADUCCIÓN PÚBLICA
[El documento es un original que consta de 5 páginas]
Buenos Aires, December 15, 2015
MOLINO CAÑUELAS S.A.C.I.F.I.A.
Kennedy N° 160, Cañuelas
Prov. of Buenos Aires
Re.: Irrevocable Purchase Offer
Dear Sirs,
MOLCA S.A., represented herein by Nicolás Mihanovic, DNI [National Identity Document] No. 23,125,825, in his capacity as president, with registered address at Av. de Mayo N° 560 Piso 1° of the city of Buenos Aires (hereinafter referred to as MOLCA); would like to submit to MOLINO CAÑUELAS S.A.C.I.F.I.A. (hereinafter referred to as MC and jointly with MOLCA, as the Parties); an irrevocable purchase offer (hereinafter referred to as the Offer), under the following terms and conditions:
1) This irrevocable Offer is made for a term of sixty (60) business days.
2) If this Proposal is not duly accepted by MC within the Acceptance Term, it shall automatically cease to be effective and valid. This Proposal shall only be deemed effective if MC submits to MOLCA its acceptance by the delivery of a written letter within the Acceptance Term.
3) Once the Offer is accepted, the relationship established between the Parties shall be regulated by the terms and conditions attached hereto as Annex I (the Terms and Conditions).
Sincerely,
[illegible signature]
Nicolás Mihanovich
President
ANNEX I
TERMS AND CONDITIONS
PARTIES:
· MOLINO CAÑUELAS S.A.C.I.F.I.A., with registered address at Kennedy N° 160, Cañuelas, Province of Buenos Aires (hereinafter referred to as MC), and
· MOLCA S.A., with registered address at Av. de Mayo N° 560 Piso 1° of the city of Buenos Aires (hereinafter referred to as MOLCA and jointly with MC, as The Parties).
WHEREAS:
(i) MOLCA owns a property identified as plot 491C-B within the industrial site located on the Left Bank of the Paraná de Las Palmas River KM 123, located at the level of Route 9 Km 95.5, of the district of Zárate, in the area of Las Palmas, referred to as Las Palmas Terminal, bordering with the Paraná de Las Palmas riverbank, which is part of a larger plot identified as 491C (hereinafter referred to as The Property which is identified in Annex II);
(ii) MC owns a property adjacent to MOLCAs property, in which it intends to establish an industrial park (hereinafter referred to as the Industrial Park Project) which shall be financed in large part by funds from the sale of part of MCs capital stock in a foreign stock market;
(iii) For the purposes of developing the Industrial Project it is essential that MC have access to the Paraná de las Palmas riverbank, as the installation of industries in such Industrial Park Project is exclusively associated with possibility of loading and lifting at the port on the riverbank;
(iv) MOLCA is interested in MCs development of the Industrial Park Project, as it shall benefit from the resulting increase in value of its property;
(vi) It is the intention of THE PARTIES to agree on an irrevocable purchase option in favor of MC, for the development of the Industrial Park Project; and
(vii) MC has no interest in the Property if it is unable to develop of the Industrial Park Project and it has the funds required for such purpose.
NOW, THEREFORE; THE PARTIES have agreed to the following:
ONE: MOLCA hereby grants to MC an irrevocable option to purchase the property identified as plot 491C-B, identified in the Map in Annex II, located on the Left Bank of the Paraná de Las Palmas River KM 123, at the level of Route 9 Km 95.5, of the district of Zárate, area of Las Palmas, referred to as the Palmas Terminal (The Property).
TWO: The irrevocable option granted herein is provided under the condition precedent that MCs shares are quoted in a foreign stock market in order to obtain the funds required to develop the Industrial Park Project.
THREE: Once the abovementioned condition precedent has been met, MC may exercise the irrevocable purchase option within the following 6 (six) months, and must report such situation to MOLCA by notice duly served. The latter shall prepare the sale deed within the following 3 (three) months. MC shall bear all expenses required for the registration of the deed. For such purpose, MOLCA hereby undertakes to obtain all of the documents required to complete the deed registration, including the subdivision to guarantee the divisibility and independence of the Property deed. In the latter circumstances, the 3 (three) month term shall begin on the date on which the subdivision of all of the plots is obtained.
In addition, MOLCA hereby states that the Property is mortgaged in favor of DEUTSCHE INVESTITIONS UNDENTWICKLUNGSGESELLSCHAFT MBH (DEG). Upon registration of the deed, the Parties must agree on whether or not such guarantee must be removed or not upon registration. Should the Parties fail to reach an agreement, it shall be understood that the mortgage must be released at least up to the amount exceeding the debt to be assumed by MC with DEG pursuant to the following clause.
Notwithstanding the term established for deed registration, MOLCA hereby undertakes to transfer the possession of the Property to MC, once the option has been exercised, along with all of the documentation required for it to fully exercise its ownership rights.
FOUR: The total and final price agreed for the purchase, if the condition is met, is One Hundred and Sixteen Million Argentine Pesos (AR$ 116,000,000) which shall be paid by MC prior to exercising the option as follows:
1) By paying the amount of Ninety-Two Million, Six Hundred and Sixty Thousand, Six Hundred and Sixty-Six Argentine Pesos and 20 cents (AR$ 92,660,666.20) by bank transfer to account No. 363-4343-9 (CBU [Single Banking Code] 0070343520000000363499) of Banco Galicia held by MOLCA, as follows: a) Four Million Argentine Pesos (AR$ 4,000,000) must be paid on 01/15/2016; b) Nine Million Argentine Pesos (AR$ 9,000,000) must be paid on 02/05/2016; and c) the remaining balance, i.e. the amount of Seventy-Nine Million, Six Hundred and Sixty Thousand, Six Hundred and Sixty-Six Argentine Pesos and 20 cents (AR$ 79,660,666.20) in one
or more installments, in all cases within the two hundred and forty (240) calendar days from the acceptance of the Offer. AND
2) By the assumption of debts and other MOLCA obligations with suppliers for the amount of Twenty-Three Million, Three Hundred and Thirty-Nine Thousand, Three Hundred and Thirty-Three Argentine Pesos and 79 cents (AR$ 23,339,333.79) as follows:
(i) Debt due to Banco Provincia de Buenos Aires for the amount of Nine Million, One Hundred and Forty-Seven Thousand and Ninety-Two Argentine Pesos (AR$ 9,147,092), corresponding to the balance of two loans due, the agreements of which are attached hereto as Annex III).
(ii) Debt due to the firm The computer for One Million, Eighty Thousand, Three Hundred and Fifty-Six Argentine Pesos and seven cents (AR$ 1,080,356.07) equal to One Hundred and Ten Thousand, One Hundred and Twenty-Eight US Dollars and four cents (USD 110,128.04), corresponding to a Computer Equipment leasing, the agreements of which are attached hereto as Annex IV.
(iii) Debt due to Banco Superville for Forty-Two Thousand, One Hundred and Fourteen Argentine Pesos and 75 cents (AR$ 42,114.75), corresponding to Equipment Leasing, the agreements of which are attached hereto as Annex V.
(iv) Part of the debt with DEUTSCHE INVESTITIONS UNDENTWICKLUNGSGESELLSCHAFT MBH (DEF) for an amount of Thirteen Million, Sixty-Nine Thousand, Seven Hundred and Seventy Argentine Pesos and 97 cents (AR$ 13,069,770.97), equal to One Million, Three Hundred and Thirty-Two Thousand, Two Hundred and Ninety US Dollars and 62 cents (USD 1,332,290.62).
Considering that the assumptions of the abovementioned debts entail express acceptance by the suppliers, MC shall have a term of eleven (11) months following the acceptance of the Offer to complete such procedures. Should MC fail to obtain total or partial acceptance by the suppliers, it shall pay to MOLCA the amount of the price it has not paid by assuming the abovementioned debts. In the latter circumstance, whether the amount of the debt to the suppliers that MC is unable to assume is total or partial, it must be paid to MOLCA within the same term and under the same financing conditions established in the agreements with each of the suppliers. The respective installments may be paid in Argentine pesos according to the selling rate of the Banco de la Nación Argentina on the closing of the business day immediately preceding the date of payment.
FIVE: If the condition referred to in clause TWO is not met or if MC fails to exercise the option to purchase the Property even if such condition is met, MOLCA must return the money paid by MC (AR$ 116,000,000) plus compensatory interest, which shall be equal to the interest paid by Banco de la Nación Argentina at the time of the return on 30 (thirty)-day fixed term operations, calculated from the date on which the funds were provided (or the debts assumed, as the case maybe) and until its effective return.
SIX:
For all legal purposes, the Parties hereby establish their registered addresses in the locations indicated in the header of this Offer. Should any disputes arise, they shall submit to the jurisdiction of the Lower Courts of the city of Buenos Aires and hereby expressly waive any other venue and/or jurisdiction that may apply.
[illegible signature]
[There is an illegible signature on the left-hand margin of pages 2 to 5 of the original document.]
I DO HEREBY CERTIFY THAT THE FOREGOING IS, TO THE BEST OF MY KNOWLEDGE, A TRUE AND ACCURATE TRANSLATION INTO ENGLISH (5 PAGES) OF THE DOCUMENT WRITTEN IN SPANISH ATTACHED HERETO AND TO WHICH I REFER. IN WITNESS THEREOF I SIGN AND SEAL THIS DOCUMENT IN THE CITY OF BUENOS AIRES, ARGENTINA, ON THE 4th DAY OF THE MONTH OF MAY OF 2017.
POR EL PRESENTE CERTIFICO Y DOY FE QUE LA QUE ANTECEDE ES A MI MEJOR SABER Y ENTENDER, UNA TRADUCCIÓN FIEL AL INGLÉS (5 PÁGINAS) DEL DOCUMENTO ADJUNTO REDACTADO EN ESPAÑOL, QUE HE TENIDO A LA VISTA Y AL CUAL ME REMITO. Y PARA QUE CONSTE, FIRMO Y SELLO EN LA CIUDAD AUTÓNOMA DE BUENOS AIRES, ARGENTINA, A LOS 4 DÍAS DEL MES DE MAYO DE 2017.
Exhibit 10.7
TRADUCCIÓN PÚBLICA
[El documento es una copia que consta de 2 páginas]
Buenos Aires, May 31, 2016
MOLINO CAÑUELAS S.A.C.I.F.I.A.
Kennedy 160, Cañuelas
Province of Buenos Aires
Re: Second Amendment to Credit Line Offer Letter
Dear Sirs,
We would like to submit to you this proposal as an amendment of the Offer Letter dated 04/11/14, regulating the Credit Line Offer (the Offer Letter), which shall be governed by the following terms and conditions if accepted by you:
WHEREAS
i) On 04/11/14, Cañuelas Golf Club S.A. (Cañuelas Golf Club) presented an offer to Molino Cañuelas S.A.C.I.F.I.A. (Molino Cañuelas jointly with Cañuelas Golf Club shall hereinafter be referred to as the Parties) for a credit line for a monetary loan (the Offer Letter), which was tacitly accepted by the latter.
ii) The expiration date indicated in the Offer Letter was 05/31/2015.
iii) On May 30, 2015, the Parties agreed under the First Amendment to renew the Credit Line until 05/31/2016.
iv) In order to renew the relationship between the Parties, new terms and conditions must be expressly agreed.
NOW, THEREFORE, Cañuelas Golf Club hereby presents to Molino Cañuelas a renewal offer subject to the conditions indicated below (the Second Amendment), which shall be deemed accepted by Molino Cañuelas if it is not expressly rejected.
ONE: The Parties agree to replace Clause 3 of the Offer Letter, establishing that the new one-year effective term shall be from 06/01/2016 to 05/31/17.
TWO: The First Amendment to the Offer Letter amends Clause 3 of the Offer Letter. All aspects and clauses of the Offer Letter not expressly amended under this Second Amendment shall remain in full force and effect and are hereby ratified by the parties. The terms spelled with an initial capital letter in
this Second Amendment (except when this is exclusively due to the fact that they are at the beginning of a sentence or are a proper noun), shall have the meanings indicated in the Offer Letter.
Sincerely,
[illegible signature]
Signature
Printed Name
I DO HEREBY CERTIFY THAT THE FOREGOING IS, TO THE BEST OF MY KNOWLEDGE, A TRUE AND ACCURATE TRANSLATION INTO ENGLISH (2 PAGES) OF THE DOCUMENT WRITTEN IN SPANISH ATTACHED HERETO AND TO WHICH I REFER. IN WITNESS THEREOF I SIGN AND SEAL THIS DOCUMENT IN THE CITY OF BUENOS AIRES, ARGENTINA, ON THE 8th DAY OF THE MONTH OF MAY OF 2017.
POR EL PRESENTE CERTIFICO Y DOY FE QUE LA QUE ANTECEDE ES A MI MEJOR SABER Y ENTENDER, UNA TRADUCCIÓN FIEL AL INGLÉS (2 PÁGINAS) DEL DOCUMENTO ADJUNTO REDACTADO EN ESPAÑOL, QUE HE TENIDO A LA VISTA Y AL CUAL ME REMITO. Y PARA QUE CONSTE, FIRMO Y SELLO EN LA CIUDAD AUTÓNOMA DE BUENOS AIRES, ARGENTINA, A LOS 8 DÍAS DEL MES DE MAYO DE 2017.
Exhibit 10.8
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INVESTMENT NUMBER 36533
AMENDED AND RESTATED LOAN AGREEMENT
among
MOLINO CAÑUELAS S.A.C.I.F.I.A.,
as Borrower
CAÑUELAS PACK S.A.,
as a Guarantor
and
INTERNATIONAL FINANCE CORPORATION
Dated September 29, 2016
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ARTICLE I |
DEFINITIONS AND INTERPRETATION |
1 | |||
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1.01. |
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Definitions |
1 | ||
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1.02. |
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Financial Calculations |
18 | ||
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1.03. |
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Interpretation |
19 | ||
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1.04. |
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Business Day Adjustment |
19 | ||
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1.05. |
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Existing Loans on the Effective Date |
19 | ||
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ARTICLE II |
THE LOAN |
19 | |||
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2.01. |
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The Additional Loan |
19 | ||
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2.02. |
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Disbursement Procedure |
20 | ||
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2.03. |
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Interest |
20 | ||
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2.04. |
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Default Rate Interest |
22 | ||
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2.05. |
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Repayment |
22 | ||
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2.06. |
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Prepayment |
23 | ||
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2.07. |
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Fees |
24 | ||
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2.08. |
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Currency and Place of Payments |
25 | ||
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2.09. |
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Allocation of Partial Payments |
26 | ||
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2.10. |
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Increased Costs |
26 | ||
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2.11. |
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Unwinding Costs |
26 | ||
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2.12. |
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Suspension or Cancellation by IFC |
26 | ||
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2.13. |
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Cancellation by the Borrower |
27 | ||
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2.14. |
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Taxes |
27 | ||
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2.15. |
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Expenses |
28 | ||
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2.16. |
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Illegality of Participation |
28 | ||
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2.17. |
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The Notes |
29 | ||
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ARTICLE III |
REPRESENTATIONS AND WARRANTIES |
29 | |||
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3.01. |
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Representations and Warranties |
29 | ||
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3.02. |
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IFC Reliance |
33 | ||
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ARTICLE IV |
CONDITIONS OF DISBURSEMENT |
33 | |||
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4.01. |
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Conditions of Effectiveness |
33 | ||
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4.02. |
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Conditions of First Disbursement |
33 | ||
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4.03. |
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Conditions of All Disbursements |
35 | ||
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4.04. |
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Borrowers Certification |
37 | ||
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4.05. |
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B Loan Conditions |
37 | ||
4.06. |
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Conditions for IFC Benefit |
37 | |
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ARTICLE V |
PARTICULAR COVENANTS |
37 | ||
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5.01. |
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Affirmative Covenants |
37 | |
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5.02. |
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Negative Covenants |
40 | |
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5.03. |
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Reporting Requirements |
47 | |
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5.04. |
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Insurance |
49 | |
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ARTICLE VI |
EVENTS OF DEFAULT |
50 | ||
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6.01. |
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Acceleration after Default |
50 | |
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6.02. |
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Events of Default |
51 | |
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6.03. |
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Bankruptcy |
53 | |
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ARTICLE VII |
GUARANTEE |
53 | ||
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7.01. |
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Guarantee |
53 | |
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7.02. |
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No Set-off |
54 | |
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7.03. |
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Certificate Conclusive |
54 | |
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7.04. |
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Application of Payments |
54 | |
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7.05. |
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Allocation |
54 | |
|
|
|
| |
7.06. |
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Waiver of Defenses |
54 | |
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|
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7.07. |
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Waiver of Notices, Claims and Prior Action |
55 | |
|
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7.08. |
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Consent |
55 | |
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| |
7.09. |
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Absolute Guarantee |
55 | |
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7.10. |
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Additional Security |
56 | |
|
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7.11. |
|
Non-Competition |
56 | |
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|
|
| |
7.12. |
|
Bankruptcy or Liquidation of Borrower |
56 | |
|
|
|
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7.13. |
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Appropriation and Application of Monies |
56 | |
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7.14. |
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Reinstatement |
57 | |
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7.15. |
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Limitation |
57 | |
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ARTICLE VIII |
MISCELLANEOUS |
57 | ||
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| |||
8.01. |
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Saving of Rights |
57 | |
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8.02. |
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Notices |
58 | |
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8.03. |
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English Language |
59 | |
|
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8.04. |
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Term of Agreement |
59 | |
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8.05. |
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Applicable Law and Jurisdiction |
59 | |
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| |
8.06. |
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Disclosure of Information |
61 | |
8.07. |
|
Indemnification; No Consequential Damages |
61 |
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8.08. |
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Successors and Assignees |
62 |
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|
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8.09. |
|
Amendments, Waivers and Consents |
62 |
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|
|
|
8.10. |
|
Counterparts |
62 |
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ANNEXES: |
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| |
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Annex A: |
[RESERVED] |
| |
Annex B: |
OBLIGOR/TRANSACTION AUTHORIZATIONS |
| |
Annex C: |
INVESTMENTS |
| |
Annex D: |
FINANCIAL DEBT |
| |
Annex E: |
CAPITALIZATION |
| |
Annex F: |
INSURANCE REQUIREMENTS |
| |
Annex G: |
EXISTING LIENS |
| |
Annex H: |
METHODOLOGY FOR FINANCIAL RATIO CALCULATIONS |
| |
Annex I: |
PROHIBITED ACTIVITIES |
| |
Annex J: |
ANTI-CORRUPTION GUIDELINES |
| |
Annex K: |
DEVELOPMENT IMPACT INDICATORS |
| |
Annex L: |
EXISTING GUARANTEES |
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SCHEDULES: |
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| |
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Schedule 1: |
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY |
| |
Schedule 2: |
FORM OF REQUEST FOR ADDITIONAL DISBURSEMENT (LOAN) |
| |
Schedule 3: |
FORM OF LOAN DISBURSEMENT RECEIPT |
| |
Schedule 4: |
FORM OF PROMISSORY NOTE |
| |
Schedule 5: |
FORM OF SOLVENCY CERTIFICATE |
| |
Schedule 6: |
FORM OF SERVICE OF PROCESS LETTER |
| |
Schedule 7: |
FORM OF LETTER TO OBLIGORS AUDITORS |
| |
Schedule 8: |
FORM OF OBLIGORS CERTIFICATION ON DISTRIBUTION OF DIVIDENDS |
| |
Schedule 9: |
FORM OF SUBSIDIARY GUARANTEE |
| |
Schedule 10: |
FORM OF ANNUAL MONITORING REPORT |
| |
Schedule 11: |
FORM OF ACTION PLAN |
|
AMENDED AND RESTATED LOAN AGREEMENT
AMENDED AND RESTATED LOAN AGREEMENT (this Agreement) dated September 29, 2016, among Molino Cañuelas S.A.C.I.F.I.A., a sociedad anonima comercial industrial financiera inmobiliaria y agropecuaria organized and existing under the laws of the Republic of Argentina (the Borrower), Cañuelas Pack S.A., a sociedad anonima organized and existing under the laws of the Republic of Argentina (Cañuelas Pack), and INTERNATIONAL FINANCE CORPORATION, an international organization established by Articles of Agreement among its member countries including the Republic of Argentina (IFC).
RECITAL
The Borrower and Cañuelas Pack entered into a Loan Agreement dated April 16, 2016 (the Existing Loan Agreement) with IFC to, among other things, finance its capital expenditure program for 2015 through 2017, inclusive;
The Borrower has requested IFC to provide the new loans described in this Agreement to, among other things, finance its recent acquisition of certain Cargill flour mills and for refinancing of indebtedness;
Cañuelas Pack and each Subsidiary Guarantor have agreed to guarantee the loans described in this Agreement; and
IFC is willing to provide those loans upon the terms and conditions set forth in this Agreement.
ARTICLE I
Definitions and Interpretation
1.01. Definitions. Wherever used in this Agreement, the following terms have the following meanings:
A Loan means, collectively, the A-1 Loan and the A-2 Loan;
A Loan Interest Rate means, for any Interest Period, the rate at which interest is payable on the A Loans during that Interest Period, determined in accordance with Section 2.03 (Interest);
A-1 Loan means the loan specified in Section 1.05 (Existing Loans on the Effective Date) or, as the context requires, its principal amount from time to time outstanding;
A-2 Loan Disbursement means any disbursement of the A-2 Loan;
A-2 Loan means the loan specified in Section 2.01 (The Additional Loan) or, as the context requires, its principal amount from time to time outstanding;
Accounting Standards means International Financial Reporting Standards (IFRS) promulgated by the International Accounting Standards Board (IASB) (which include standards and interpretations approved by the IASB and International Accounting Standards issued under previous constitutions), together with its pronouncements thereon from time to time, and applied on a consistent basis;
Action Plan means the plan or plans developed by the Borrower setting out specific social and environmental measures to be undertaken by the Borrower and its Subsidiaries, to enable their respective Operations to comply with the Performance Standards, substantially in the form of Schedule 11 hereto, as such may be amended or supplemented from time to time in accordance with the terms hereof;
Additional Disbursement means any disbursement of the A-2 Loan or the B-2 Loan or both, as the context requires;
Additional Loans means, collectively, the A-2 Loan and the B-2 Loan;
Adelia Maria Plant means the production facility of the Borrower located in Adelia Maria, Province of Cordoba, Argentina;
Affiliate means any Person directly or indirectly controlling, controlled by or under common control with, an Obligor (for purposes of this definition, control means the power to direct the management or policies of a Person, directly or indirectly, whether through the ownership of shares or other securities, by contract or otherwise, provided that the direct or indirect ownership of 20% or more of the voting capital stock of a Person is deemed to constitute control of that Person, and controlling and controlled have corresponding meanings);
Annual Monitoring Report means the annual monitoring report substantially in the form attached as Schedule 10 hereto setting out the specific social, environmental and developmental impact reporting requirements of the Obligors in respect of their and their Subsidiaries Operations, as such may be amended or supplemented from time to time in accordance with the terms hereof;
Applicable Priority Security Interest means (a) with respect to the assets and rights under the Spegazzini Security Documents a first or second priority perfected security interest, as the case may be and as specified in the Security Documents and (b) with respect to all other assets and rights subject to the Security Documents, a first priority perfected security interest as specified in the Security Documents;
Applicable S&E Law means all applicable statutes, laws, ordinances, rules and regulations of the Country, including but not limited to any license, permit or other governmental Authorization, imposing liability or setting standards of conduct concerning any environmental, social, labor, health and safety or security risks of the type contemplated by the Performance Standards;
Auditors means PricewaterhouseCoopers or such other firm that the Obligors appoint from time to time as its auditors pursuant to Section 5.01(e) (Affirmative Covenants);
Authority means any national, supranational, regional or local government or governmental, administrative, fiscal, judicial, or government-owned body, department, commission, authority, tribunal, agency or entity, or central bank (or any Person, whether or not government owned and howsoever constituted or called, that exercises the functions of a central bank);
Authorization means any consent, registration, filing, agreement, notarization, certificate, license, approval, permit, authority or exemption from, by or with any Authority, whether given by express action or deemed given by failure to act within any specified time period and all corporate, creditors and shareholders approvals or consents;
Authorized Representative means any natural person who is duly authorized by the applicable Obligor, to act on its behalf for the purposes specified in, and whose name and a specimen of whose
signature appear on, the Certificate of Incumbency and Authority most recently delivered by such Person to IFC;
Availability Period means the period from and including the date of this Agreement to and December 29, 2016;
Banco Ciudad means Banco Ciudad De Buenos Aires;
Banco Ciudad Debt means the Financial Debt of the Borrower under the Loan Agreement (named in Spanish Contrato de Prestamo) dated January 12, 2012 between the Borrower and Banco Ciudad;
Bankruptcy Code means the United States Bankruptcy Code;
B Loan means, collectively, the B-1 Loan and the B-2 Loan;
B Loan Interest Rate means, for any Interest Period, the rate at which interest is payable on the B Loans during that Interest Period, determined in accordance with Section 2.03 (Interest);
B-1 Loan means the loan specified in Section 1.05 (Existing Loans on the Effective Date) or, as the context requires, its principal amount from time to time outstanding;
B-2 Loan Disbursement means any disbursement of the B-2 Loan;
B-2 Loan means the loan specified in Section 2.01 (The Additional Loan) or, as the context requires, its principal amount from time to time outstanding;
Business Day means a day when banks are open for business in Buenos Aires, Argentina, New York, New York and, solely for the purpose of determining the applicable Interest Rate other than pursuant to Section 2.03(d)(ii) (Interest), London, England;
Calculation Period means for any calculation, a period of 4 consecutive quarters most recently ended prior to the event requiring the calculation for which financial statements should have been delivered to IFC pursuant to the terms and conditions hereof;
Cañuelas / Adelia Maria Amendatory Security Documents means the documents and instruments providing for the amendments to the Cañuelas / Adelia Maria Security Documents necessary to extend the coverage of the IFC Security set forth therein with respect to the A-2 Loan and the B-2 Loan provided for herein;
Cañuelas / Adelia Maria Security Documents means the documents providing for IFC Security consisting of:
(i) a first-ranking mortgage (hipoteca) over the Cañuelas Plant and the Adelia Maria Plant (including, without limitation, all facilities and all and any movables affixed thereto, improvements and fixtures and any and all assets in replacements thereof) in form and substance satisfactory to IFC; provided that this first-ranking mortgage shall be shared between IFC and Rabobank NY, on a pari passu basis, on the terms of, and under the conditions set forth in, the Security Sharing and Intercreditor Agreement;
(ii) a first-ranking chattel mortgage (prenda con registro) over movable assets of the Borrower installed in the Cañuelas Plant and the Adelia Maria Plant, in form and substance satisfactory to IFC; provided that this first-ranking mortgage shall be shared between IFC and Rabobank NY, on a pari passu basis, on the terms of, and under the conditions set forth in, the Security Sharing and Intercreditor Agreement; and
(iii) all other documents, instruments and agreements relating to, or in connection with, any of the foregoing (including, without limitation, the Cañuelas / Adelia Maria Amendatory Security Documents);
Cañuelas Plant means the production facility of the Borrower located in Cañuelas, Province of Buenos Aires, Argentina;
Cargill means Cargill S.A.C.I., a corporation (sociedad anonima) incorporated and existing under the laws of the Country;
Cargill Acquisition means the acquisition by the Borrower from Cargill of Cargills wheat milling business in the Country including, inter alia, plants located in Pilar, Province of Buenos Aires and Rosario, Province of Santa Fe (and all facilities, movables affixed thereto, improvements and fixtures and workers) pursuant to the terms and conditions of, and as more fully described in, the Offer Letter (Carta Oferta) issued and delivered by the Borrower to Cargill on June 22, 2016, as the same has been fully and unconditionally accepted by Cargill on June 22, 2016;
Cash means money or currency;
Cash Equivalents means, as at any date of determination, collectively, (i) short-term marketable securities acquired solely to give temporary employment to idle funds; (ii) commercial bank deposits in the ordinary course of business; (iii) repurchase obligations for underlying securities of the type described in clause (i) above, or (iv) money market funds;
Certificate of Incumbency and Authority means a certificate provided to IFC in the form of Schedule 1;
Change of Control means any of the following: (i) the Current Shareholders, collectively, at any time and for any reason cease to own at least a majority of both the economic and voting interests in each Original Obligors share capital (determined on a fully diluted basis), (ii) any Person or group other than the Current Shareholders shall have obtained the power (whether or not exercised) to elect a majority of the board of directors of either Original Obligor or (iii) the Borrower shall fail to own 90% of both the economic and voting interests in any Subsidiary Guarantors share capital;
Charter means with respect to any Person, the memorandum and articles of association and/or such other constitutive document, howsoever called, of such Person;
Coercive Practice has the meaning assigned to it in Annex J;
Collusive Practice has the meaning assigned to it in Annex J;
Compliance Advisor/Ombudsman (CAO) means the independent accountability mechanism for IFC that impartially responds to environmental and social concerns of affected communities and aims to enhance outcomes;
Consolidated or Consolidated Basis means (with respect to any financial statements to be provided, or any financial calculation to be made, under or for the purposes of this Agreement and any other Transaction Document) the method referred to in Section 1.02(c) (Financial Calculations); and the entities, if any, whose accounts are to be consolidated with the accounts of an Obligor are all the Subsidiaries of such Obligor;
Corrupt Practice has the meaning assigned to it in Annex J;
Country means the Republic of Argentina;
Current Assets means the Consolidated Cash, inventories, investments classified as held for trading, investments classified as available for sale, trade and other receivables realizable within 1 year, and prepaid expenses of any Person or specified group of Persons which are to be charged to income within 1 year;
Current Liabilities means the Consolidated liabilities of any Person or specified group of Persons falling due on demand or within 1 year (including the portion of Long-term Debt falling due within 1 year);
Current Ratio means the result obtained by dividing Current Assets (less prepaid expenses) by Current Liabilities;
Current Shareholders means each of the Persons identified on Annex E as shareholders of the Obligors;
Derivative Transaction means any swap agreement, cap agreement, collar agreement, futures contract, forward contract or similar arrangement with respect to interest rates, currencies or commodity prices;
Dollar Debt Service to Exports Ratio means, on any day, the ratio obtained by dividing:
(i) 25% of all the Borrowers export revenues during the most recently ended Calculation Period;
by
(ii) the aggregate of (A) all scheduled payments (including balloon payments) that fall due during the Financial Year in which the relevant date of calculation falls on account of principal of Long-term Debt and interest and other charges on all Financial Debt and (B) without double counting any payment already counted in the preceding sub-clause (A), any payment made or required to be made to any debt service account during such Financial Year under the terms of any agreement providing for Financial Debt;
where, for the purposes of clause (ii) above:
(x) subject to sub-clause (y) below, for the computation of interest payable during any period for which the applicable rate is not yet determined, that interest shall be computed at the rate in effect at the time of the relevant date of calculation; and
(y) interest on Short-term Debt payable in the Financial Year in which the relevant date of calculation falls shall be computed by reference to the aggregate amount of interest thereon paid during that Financial Year up to the end of the period covered by the latest quarterly financial statements prepared by such Person multiplied by a factor of 4, 2 or 4/3 depending on whether the computation is made by reference to the financial statements for the first quarter, the first 2 quarters or the first 3 quarters, respectively;
Dollars and $ means the lawful currency of the United States of America;
EBITDA means for the relevant Calculation Period for any Person or specified group of Persons, Net Income for such Calculation Period (without giving effect to (x) any extraordinary gains, (y) any non-cash income, and (z) any gains or losses from sales of assets other than inventory sold in the ordinary course of business) adjusted by adding thereto (in each case to the extent deducted in determining Net Income for such period), without duplication, the amount of (i) total interest expense (inclusive of amortization of deferred financing fees and other original issue discount and banking fees, charges and commissions (e.g., letter of credit fees and commitment fees)) of such Person or specified group of Persons determined on a Consolidated Basis for such period, (ii) tax expense based on income and foreign withholding taxes for such Person or specified group of Persons determined on a Consolidated Basis for such period, and (iii) all depreciation and amortization expense of such Person or specified group of Persons determined on a Consolidated Basis for such period;
Event of Default means any one of the events specified in Section 6.02 (Events of Default);
Existing Guarantees means each of the guarantees listed on Annex L;
Financial Debt means as to any Person:
(i) any indebtedness of such Person for or in respect of borrowed money;
(ii) the outstanding principal amount of any bonds, debentures, notes, loan stock, commercial paper, acceptance credits, bills or promissory notes drawn, accepted, endorsed or issued by such Person;
(iii) any indebtedness of such Person for or in respect of the deferred purchase price of assets or services (except trade accounts incurred and payable in the ordinary course of business to trade creditors of such Person within 90 days of the date they are incurred and which are not overdue);
(iv) non-contingent obligations of such Person to reimburse any other Person for amounts payable by that Person under a letter of credit or similar instrument (excluding any letter of credit or similar instrument issued for the account of such Person with respect to trade accounts incurred and payable in the ordinary course of business to trade creditors of such Person within 90 days of the date they are incurred and which are not overdue);
(v) the amount of any obligation of such Person in respect of any Financial Lease;
(vi) amounts raised by such Person under any other transaction having the financial effect of a borrowing and which would be classified as a borrowing (and not as an off-balance sheet financing) under the Accounting Standards;
(vii) the amount of the obligations of such Person under derivative transactions entered into in connection with the protection against or benefit from fluctuation in any rate or price (but only the net amount owing by such Person after marking the relevant derivative transactions to market);
(viii) all indebtedness of the types described in the foregoing items secured by a Lien on any property owned by such Person, whether or not such indebtedness has been assumed by such Person;
(ix) all obligations of such Person to pay a specified purchase price for goods and services, whether or not delivered or accepted (i.e., take or pay or similar obligations);
(x) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, any liability of such Person under any sale and leaseback transactions that do not create a liability on the balance sheet of such Person, any obligation under a synthetic lease or any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person;
(xi) the amount of any obligation in respect of any guarantee or indemnity given by such Person for any of the foregoing items incurred by any other Person, including the Existing Guarantees; and
(xii) any premium payable by such Person on a redemption or replacement of any of the foregoing items;
Financial Lease means any lease or hire purchase contract which would, under the Accounting Standards, be treated as a finance or capital lease;
Financial Quarter means a financial quarter of a Financial Year;
Financial Year means with respect to the Obligors and each of their Subsidiaries, the accounting year commencing each year on December 1 and ending on the following November 30, or such other period as such Person, with IFCs consent, from time to time designates as its accounting year;
Fraudulent Practice means has the meaning assigned to it in Annex J;
Guaranteed Obligations means all debts and monetary liabilities of the Borrower to IFC under or in relation to this Agreement and any other Transaction Document, and the Note(s) and in any capacity irrespective of whether the debts or liabilities are: (i) now existing or hereafter arising; (ii) actual or contingent; (iii) at any time ascertained or unascertained; (iv) direct or indirect; (v) joint or several or whether IFCs corresponding rights are joint or several; (vi) secured or unsecured; (vii) owed or incurred as principal, interest, fees, charges, taxes, duties or other imposts, damages, losses, costs or expenses, or on any other account; (viii) owed based on contract, tort, operation of law or otherwise; or (ix) comprised
of any combination of the above; including all extensions, renewals, replacements and modifications of any of the foregoing;
IFC Fee Letter means that certain amended and restated fee letter, dated as of the date hereof, between IFC and the Borrower;
IFC Security means the security created by or pursuant to the Security Documents to secure all amounts owing to IFC under this Agreement;
Increased Costs means the amount certified in an Increased Costs Certificate to be the net incremental costs of, or reduction in return to, IFC or any Participant in connection with the making or maintaining of the Loans or its Participation that result from:
(i) any change in any applicable law or regulation or directive (whether or not having the force of law) or in its interpretation or application by any Authority charged with its administration; or
(ii) compliance with any request from, or requirement of, any central bank or other monetary or other Authority;
which, in either case, after the date of this Agreement:
(A) imposes, modifies or makes applicable any reserve, special deposit or similar requirements against assets held by, or deposits with or for the account of, or loans made by, IFC or that Participant;
(B) imposes a cost on IFC as a result of IFC having made the Loans or on that Participant as a result of that Participant having acquired its Participation or reduces the rate of return on the overall capital of IFC or that Participant that it would have achieved, had IFC not made the Loans or that Participant not acquired its Participation, as the case may be;
(C) changes the basis of taxation on payments received by IFC in respect of the Loans or by that Participant with respect to its Participation (otherwise than by a change in taxation of the overall net income of IFC or that Participant imposed by the jurisdiction of its incorporation or in which it books its Participation or in any political subdivision of any such jurisdiction); or
(D) imposes on IFC or that Participant any other condition regarding the making or maintaining of the Loans or its Participation;
but excluding any incremental costs of making or maintaining a Participation that are a direct result of that Participant having its principal office in the Country or having or maintaining a permanent office or establishment in the Country, if and to the extent that permanent office or establishment acquires that Participation;
Increased Costs Certificate means a certificate provided from time to time by IFC (based on a certificate to IFC from any Participant, if Increased Costs affect its Participation), certifying:
(i) the circumstances giving rise to the Increased Costs;
(ii) that the costs of IFC or, as the case may be, that Participant, have increased or the rate of return of either of them has been reduced;
(iii) that, IFC or, as the case may be, that Participant, has, in its opinion, exercised reasonable efforts to minimize or eliminate the relevant increase or reduction, as the case may be; and
(iv) the amount of Increased Costs;
Initial Loans means, collectively, the A-1 Loan and the B-1 Loan;
Interest Determination Date means except as otherwise provided in Section 2.03(d)(ii) (Interest), the second Business Day before the beginning of each Interest Period;
Interest Expense means for any period, (i) the total Consolidated interest expense of any Person or specified group of Persons (including, without limitation, all commissions, discounts and other commitment and banking fees and charges (e.g., fees with respect to letters of credit, interest rate hedging agreements and other derivative agreements) for such period (calculated without regard to any limitations on payment thereof), adjusted to exclude (to the extent same would otherwise be included in the calculation above in this clause (i)) the amortization of any deferred financing costs for such period and any interest expense actually paid in kind or accreted during such period, plus (ii) without duplication, (x) that portion of Financial Lease obligations of such Person or specified group of Persons on a Consolidated Basis representing the interest factor for such period and (y) the deemed interest expense (i.e., the interest expense which would have been applicable if the respective obligations were structured as on-balance sheet financing arrangements) with respect to all Financial Debt of such Person or specified group of Persons of the type described in clause (x) of the definition of Financial Debt contained herein (to the extent same does not arise from a financing arrangement constituting an operating lease) for such period;
Interest Payment Date means March 15 and September 15 in each year in any year;
Interest Period means each period of 6 months in each case beginning on an Interest Payment Date and ending on the day immediately before the next following Interest Payment Date, except in the case of the first period applicable to each Additional Disbursement when it means the period beginning on the date on which that Additional Disbursement is made and ending on the day immediately before the next following Interest Payment Date;
Interest Rate means (i) with respect to each A Loan, the A Loan Interest Rate, or (ii) with respect to each B Loan, the B Loan Interest Rate, as the context requires;
Investment has the meaning specified in Section 5.02(k);
Liabilities means the aggregate of all obligations (actual or contingent) of any Person to pay or repay money, including, without limitation:
(i) Financial Debt of such Person;
(ii) the amount of all liabilities of such Person under any conditional sale or a transfer with recourse or obligation to repurchase, including, without limitation, by way of discount or factoring of book debts or receivables;
(iii) taxes (including deferred taxes) of such Person;
(iv) trade accounts that are payable in the ordinary course of business to trade creditors of such Person within 90 days of the date they are incurred and which are not overdue (including letters of credit or similar instruments issued for the account of such Person with respect to such trade accounts);
(v) accrued expenses of such Person, including wages and other amounts due to employees and other services providers;
(vi) the amount of all liabilities of such Person howsoever arising to redeem any of its shares; and
(vii) to the extent (if any) not included in the definition of Financial Debt, the amount of all liabilities of any other Person to the extent such Person guarantees them or otherwise obligates itself to pay them;
Liabilities to Tangible Net Worth Ratio means the result obtained by dividing (a) Liabilities minus, solely for purposes of calculating this ratio as of the end of the Financial Quarters ending May 31, 2016 and November 30, 2016, the amount of the Existing Guarantees outstanding as at such date by (b) Tangible Net Worth;
LIBOR means the interbank offered rates for deposits in the Loan Currency by the ICE Benchmark Administration Limited (ICE) (or NYSE Euronext or any applicable successor entity) which appear on the relevant page of the Reuters Service (currently page LIBOR01) or, if not available, on the relevant pages of any other service (such as Bloomberg Financial Markets Service) that displays such rates; provided that if the ICE (or NYSE Euronext, or any applicable successor entity) for any reason ceases (whether permanently or temporarily) to publish interbank offered rates for deposits in the Loan Currency for the relevant Interest Period, LIBOR shall mean the rate determined pursuant to Section 2.03(d) (Interest). Notwithstanding the foregoing or any other provisions of this Agreement, if LIBOR as determined above shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement;
Lien means any mortgage, pledge, charge, assignment, hypothecation, security interest, title retention, preferential right, trust arrangement, right of set-off, counterclaim or bankers lien, privilege or priority of any kind having the effect of security, any designation of loss payees or beneficiaries or any similar arrangement under or with respect to any insurance policy or any preference of one creditor over another arising by operation of law;
Loans means collectively, the A Loans and the B Loans or, as the context requires, the principal amount of the A Loans and the B Loans outstanding from time to time;
Loan Currency means Dollars;
Long-term Debt means Financial Debt whose final maturity falls due more than 1 year after the date it is incurred (including the current maturities thereof);
Market Disruption Event means that, before the close of business in London on the Interest Determination Date for the relevant Interest Period, the cost to IFC or Participants whose Participations in the Loans represent in the aggregate 30% or more of the outstanding principal amount of the Loans (as
notified to IFC by such Participants) of funding the Loans or such Participations (as applicable) would be in excess of LIBOR;
Material Adverse Effect means a material adverse effect on:
(i) any Obligor and/or any of their respective Subsidiaries business, operations, property, liabilities, condition (financial or otherwise), prospects or the carrying on of any Obligor and its Subsidiaries business or operations;
(ii) the rights and remedies of IFC under any Transaction Document; or
(iii) the ability of any Obligor and/or any of their respective Subsidiaries to comply with their respective obligations under this Agreement or under any other Transaction Document to which any of them is a party;
Material Subsidiary means (a) a Subsidiary of an Original Obligor that has total assets in excess of 5.0% of Consolidated total assets of such Original Obligor and its Subsidiaries or contributed greater than 5.0% of the Consolidated EBITDA of such Original Obligor and its Subsidiaries (based upon and as of the date of delivery of the most recent Consolidated financial statements of such Original Obligor furnished pursuant to Section 5.03); or (b) any Subsidiary that directly owns equity interests in any other Material Subsidiary; provided that the total assets or Consolidated EBITDA of all the Subsidiaries that are not Material Subsidiaries shall not exceed 10% of the Consolidated total assets or Consolidated EBITDA, as the case may be, of the Original Obligor and their Subsidiaries (based upon and as of the date of delivery of the most recent Consolidated financial statements of the Original Obligor furnished pursuant to Section 5.03).
MOLCA Lease Agreement means the lease agreement between MOLCA S.A. and the Borrower, with respect to the leasing by the Borrower of the port facility located in Zarate, Province of Buenos Aires, stipulating, among other things, the term of the lease (which must cover the entire life of the Loan) and total annual payments to be made to MOLCA S.A.;
Net Financial Debt to EBITDA Ratio means for the relevant Calculation Period, the ratio of (a) Financial Debt on the last day of the Calculation Period minus the aggregate stated balance sheet amount of all Cash and Cash Equivalents of such Person and its Subsidiaries as at such date minus, solely for purposes of calculating this ratio as of the end of (i) the 2nd Fiscal Quarter of each Fiscal Year, raw materials and finished goods of the such Person and its Subsidiaries as at such date and (ii) the Financial Quarters ending May 31, 2016 and November 30, 2016, the amount of the Existing Guarantees as at such date to (b) EBITDA for the Calculation Period ending on such date;
Net Income means for any period, the excess (if any) of gross income over total expenses (provided that income taxes shall be treated as part of total expenses) during such period for any Person or specified group of Persons;
Non-Cash Items means for any period, the net aggregate amount (which may be a positive or negative number) of all non-cash income (as a negative item) and non-cash expense (as a positive item) items which (under accrual accounting) were added or subtracted in determining Net Income for any Person or specified group of Persons for such period, including, without limitation, equity earnings in Subsidiaries, asset revaluations, depreciation, amortization, deferred taxes, and provisions for severance pay of staff and workers;
Notes has the meaning assigned to it in Section 2.17 (The Notes);
Obligors means, collectively, the Borrower, Cañuelas Pack and each Subsidiary Guarantor (each individually an Obligor);
Obstructive Practice has the meaning assigned to it in Annex J;
Operations means the operations, activities and facilities of any Person (including the design, construction, operation, maintenance, management and monitoring thereof, as applicable);
Original Obligor means the Borrower and Cañuelas Pack.
Participant means any Person who acquires a Participation;
Participation means the interest of any Participant in any B Loan, or as the context requires, in a B-2 Loan Disbursement;
Participation Agreement means an agreement entitled Amended and Restated Master Participation Agreement between IFC and the Participant(s) pursuant to which each Participant acquires a Participation;
Peak Debt Service Coverage Ratio means, on any day, the ratio obtained by dividing:
(i) the aggregate of (A) Net Income for the most recently ended Calculation Period, (B) Non-Cash Items for such Calculation Period and (C) the amount of all payments that were due during such Calculation Period on account of interest and other charges on Financial Debt (to the extent deducted from Net Income);
by
(ii) the aggregate of (A) the highest aggregate amount, in any 1 Financial Year from the Financial Year in which the relevant date of calculation falls until the Financial Year of the final scheduled maturity of the Loans, of all scheduled payments (including balloon payments) falling due on account of principal of Long-term Debt and interest and other charges on all Financial Debt during such Financial Year and (B) without double counting any payment already counted in the preceding sub-clause (A), any payment required to be made to any debt service account in such Financial Year under the terms of any agreement providing for Financial Debt;
where, for the purposes of clause (ii) above:
(x) subject to sub-clause (y), for the computation of interest payable during any period for which the applicable rate is not yet determined, that interest shall be computed at the rate in effect at the time of the relevant date of calculation;
(y) interest on Short-term Debt in such Financial Year shall be computed by reference to the aggregate amount of interest thereon paid during the Financial Year in which the relevant date of calculation falls up to the end of the period covered by the latest quarterly financial statements prepared by such Person multiplied by a factor of 4, 2 or 4/3 depending on whether the computation is made by reference to the financial
statements for the first quarter, the first 2 quarters or the first 3 quarters, respectively;
Performance Standards means IFCs Performance Standards on Social & Environmental Sustainability, dated January 1, 2012, a copy of which has been delivered to and receipt of which has been acknowledged by each Obligor;
Permitted Acquisition means the acquisition by an Obligor or a Subsidiary of an Obligor of a Person or business (including by way of merger of such Person or business with and into an Obligor or a Subsidiary (so long as such Obligor or such Subsidiary is the surviving corporation)), provided that (in each case) (A) the consideration paid or to be paid by such Obligor or such Subsidiary consists solely of cash, the issuance or incurrence of Financial Debt otherwise permitted by the Transaction Documents and the assumption/acquisition of any Financial Debt (calculated at face value) of such acquired Person or business which is permitted to remain outstanding in accordance with the requirements of the Transaction Documents, (B) the acquired Person or business is in a business permitted by the Transaction Documents and (C) all other requirements of the Transaction Documents applicable to Permitted Acquisitions are satisfied;
Permitted Lien has the meaning specified in Section 5.02(f) (Negative Covenants);
Permitted Refinancing Debt means Financial Debt issued in connection with any refinancing otherwise permitted under Section 5.02(b) (Negative Covenants); provided that:
(i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Debt does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Financial Debt so refinanced (plus the amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Debt has a final maturity date later than the final maturity date of, and has a weighted average life to maturity equal to or greater than the weighted average life to maturity of, the Financial Debt being refinanced;
(iii) such Permitted Refinancing Debt, and the agreements and other documents entered into by an Obligor and/or any of its Subsidiaries in connection therewith shall contain terms and conditions (including, without limitation, with respect to the obligor and guarantors, if any, in respect of such Financial Debt so refinanced, amortization schedules, interest rates, redemption provisions, covenants, defaults, security, remedies and, if the Financial Debt so refinanced is subordinated to any other Financial Debt of such Obligor or its Subsidiaries, subordination provisions) not materially less favorable to such Obligor and its Subsidiaries or to IFC than the terms and conditions of the Financial Debt so refinanced (excluding, for purposes of this clause (iii), the impact of market conditions on the interest rate and other economic terms); and
(iv) such Financial Debt is incurred either by the Obligor or the Subsidiary that is the obligor with respect to the Financial Debt being refinanced;
Person means any natural person, corporation, company, partnership, firm, voluntary association, joint venture, trust, unincorporated organization, Authority or any other entity whether acting in an individual, fiduciary or other capacity;
Peso means the lawful currency of the Country;
Pilar Plant means the production facility of the Borrower located in Pilar, Province of Buenos Aires, Argentina;
Pilar Security Documents means the documents providing for IFC Security consisting of:
(i) a first-ranking mortgage (hipoteca) over the Pilar Plant (including, without limitation, all facilities and all and any movables affixed thereto, improvements and fixtures and any and all assets in replacements thereof) in form and substance satisfactory to IFC;
(ii) a first-ranking chattel mortgage (prenda con registro) over movable assets of the Borrower installed in the Pilar Plant, in form and substance satisfactory to IFC; and
(iii) all other documents, instruments and agreements relating to, or in connection with, any of the foregoing;
Potential Event of Default means any event or circumstance which would, with notice, lapse of time, the making of a determination or any combination thereof, become an Event of Default;
Pro Forma Basis means, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (x) the incurrence of any Financial Debt, (y) the permanent repayment of any Financial Debt after the first day of the relevant period described therein, and (z) any Permitted Acquisition, the making of a Restricted Payment or any other transaction subject to pro forma financial covenant compliance hereunder consummated during the relevant period, with the following rules to apply in connection therewith:
(i) all Financial Debt (x) incurred or issued after the first day of the relevant period shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of such period and remain outstanding through the date of determination and (y) permanently retired or redeemed after the first day of the relevant period shall be deemed to have been retired or redeemed on the first day of such period and remain retired through the date of determination;
(ii) all Financial Debt assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest at (x) in the case of fixed rate Financial Debt, the rate applicable thereto, or (y) in the case of floating rate Financial Debt, the rates which would have been applicable thereto during the respective period when the same was deemed outstanding; and
(iii) in making any determination of EBITDA on a Pro Forma Basis, pro forma effect shall be given to any Permitted Acquisition or any other transaction subject to pro forma financial covenant compliance hereunder if effected during the respective period as if the same had occurred on the first day of the respective period but without taking into account any pro forma cost savings and expenses;
Prohibited Activities means the activities specified in Annex I;
Prospective Debt Service Coverage Ratio means, on any day, the ratio obtained by dividing:
(i) the aggregate of (A) Net Income for the most recently ended Calculation Period, (B) Non-Cash Items for such Calculation Period and (C) the amount of all payments that were due during such Calculation Period on account of interest and other charges on Financial Debt (to the extent deducted from Net Income);
by
(ii) the aggregate of (A) all scheduled payments (including balloon payments) that fall due during the Financial Year in which the relevant date of calculation falls on account of principal of Long-term Debt and interest and other charges on all Financial Debt and (B) without double counting any payment already counted in the preceding sub-clause (A), any payment made or required to be made to any debt service account during such Financial Year under the terms of any agreement providing for Financial Debt;
where, for the purposes of clause (ii) above:
(x) subject to sub-clause (y) below, for the computation of interest payable during any period for which the applicable rate is not yet determined, that interest shall be computed at the rate in effect at the time of the relevant date of calculation; and
(y) interest on Short-term Debt payable in the Financial Year in which the relevant date of calculation falls shall be computed by reference to the aggregate amount of interest thereon paid during that Financial Year up to the end of the period covered by the latest quarterly financial statements prepared by such Person multiplied by a factor of 4, 2 or 4/3 depending on whether the computation is made by reference to the financial statements for the first quarter, the first 2 quarters or the first 3 quarters, respectively;
Rabobank NY means Cooperatieve Rabobank U.A., New York Branch (formerly known as Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland, New York Branch);
Rabobank Debt means the Financial Debt of the Borrower under the Medium Term Trade Finance Facility dated November 12, 2014 among the Borrower, Compañia Argentina de Granos S.A. and Rabobank NY;
Related-Party Transactions Corporate Policy means a policy of each Obligor with respect to the terms of transactions of such Obligor with its Affiliates, which shall be in form and substance satisfactory to IFC;
Relevant Spread means (i) with respect to each A Loan, 5.50% per annum, and (ii) with respect to each B Loan, 5.00% per annum;
Restricted Payment means, with respect to any Person, the (i) declaration or payment of a dividend, distribution or return of any equity capital to its stockholders, partners or members or authorization or making of any other distribution, payment or delivery of property (other than common stock of such Person) or Cash to its stockholders, partners or members in their capacity as such, or (ii) redemption, retirement, purchase or other acquisition of, or permitting of any Subsidiary to redeem, retire, purchase or otherwise acquire, directly or indirectly, any shares of any class of its capital stock
outstanding on or after the date of this Agreement (or any options or warrants issued by such Person with respect to its capital stock), or setting aside of any funds for any of the foregoing purposes, or (iii) making of any payment of any kind on or in respect of Financial Debt held by any Affiliate of such Person. Without limiting the foregoing, Restricted Payments with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes;
Rosario Plant means the production facility of the Borrower located in Rosario, Province of Santa Fe, Argentina;
Rosario Security Documents means the documents providing for IFC Security consisting of:
(i) a first-ranking mortgage (hipoteca) over the Rosario Plant (including, without limitation, all facilities and all and any movables affixed thereto, improvements and fixtures and any and all assets in replacements thereof) in form and substance satisfactory to IFC;
(ii) a first-ranking chattel mortgage (prenda con registro) over movable assets of the Borrower installed in the Rosario Plant, in form and substance satisfactory to IFC; and
(iii) all other documents, instruments and agreements relating to, or in connection with, any of the foregoing;
S&EA means the social and environmental review summary (ESRS) and supporting environmental and social action plan (ESAP) prepared and disclosed on December 22, 2015, in accordance with the Performance Standards;
S&E Management System means each Obligors social and environmental management system enabling it to identify, assess and manage risks in respect of its and its Subsidiaries Operations on an ongoing basis;
Sanctionable Practice means any Corrupt Practice, Fraudulent Practice, Coercive Practice, Collusive Practice, or Obstructive Practice, as those terms are defined herein and interpreted in accordance with the Anti-Corruption Guidelines attached to this Agreement as Annex J;
Security Documents means the documents providing for the IFC Security consisting of:
(i) the Cañuelas / Adelia Maria Security Documents;
(ii) the Pilar Security Documents;
(iii) Rosario Security Documents; and
(iv) the Spegazzini Security Documents;
Security Sharing and Intercreditor Agreement means the agreement entitled Security Sharing and Intercreditor Agreement dated June 16, 2016 between Rabobank NY and IFC, as amended by an amendment thereto dated as of the date hereof;
Share Retention Agreement means the share retention agreement entitled Share Retention Agreement dated June 16, 2016 among the Current Shareholders and IFC;
Short-term Debt means all Financial Debt other than Long-term Debt;
Spegazzini Amendatory Security Documents means the documents and instruments providing for the amendments to the Spegazzini Security Documents necessary to extend the coverage of the IFC Security set forth therein with respect to the A-2 Loan and the B-2 Loan provided for herein;
Spegazzini Plant means the production facility of the Borrower located in Spegazzini, Province of Buenos Aires, Argentina;
Spegazzini Security Documents means the documents providing for IFC Security consisting of:
(i) a first or second ranking mortgage (hipoteca), as the case may be, over the Spegazzini Plant (including, without limitation, all facilities and all and any movables affixed thereto, improvements and fixtures and any and all assets in replacements thereof) in form and substance satisfactory to IFC;
(ii) a first or second ranking chattel mortgage (prenda con registro), as the case may be, over movable assets of the Borrower installed in the Spegazzini Plant, in form and substance satisfactory to IFC; and
(iii) all other documents, instruments and agreements relating to, or in connection with, any of the foregoing (including, without limitation, the Spegazzini Amendatory Security Documents);
Subsidiary means with respect to any Person, any Affiliate over 50% of whose capital is owned, directly or indirectly, by that Person;
Subsidiary Guarantee means each guarantee agreement, substantially in the form of Schedule 9 hereto, executed by a Material Subsidiary of an Obligor;
Subsidiary Guarantor means each Material Subsidiary that has executed a counterpart to the Subsidiary Guarantee.
Tangible Net Worth means with respect to any Person, the aggregate of:
(i) (A) the amount paid up on the share capital of such Person; and
(B) the amount standing to the credit of the reserves of such Person (including, without limitation, any share premium account, capital redemption reserve funds and any credit balance on the accumulated profit and loss account);
after deducting from the amounts in (A) and (B):
(w) any debit balance on the profit and loss account or impairment of the issued share capital of such Person (except to the extent that deduction with respect to that debit balance or impairment has already been made);
(x) amounts set aside for dividends to the extent not already deducted from equity;
(y) amounts of deferred tax assets; and
(z) amounts attributable to capitalized items such as goodwill, trademarks, deferred charges, licenses, patents and other intangible assets; and
(ii) if applicable, that part of the net results of operations and the net assets of any subsidiary of such Person attributable to interests that are not owned, directly or indirectly, by such Person;
Taxes means any present or future taxes, withholding obligations, duties and other charges of whatever nature levied by any Authority;
Termination Date has the meaning specified in Section 7.01(d) (Guarantee);
Transaction means (a) with respect to the Initial Loans, the financing of the Borrowers capital expenditure program for 2015 through 2017 and refinancing of certain of the Borrowers Financial Debt and (b) with respect to the Additional Loans, the financing of the recent Cargill Acquisition and refinancing of certain of the Borrowers Financial Debt;
Transaction Documents means:
(i) this Agreement;
(ii) the Notes;
(iii) the IFC Fee Letter;
(iv) the Subsidiary Guarantees;
(v) the Security Documents;
(vi) the Security Sharing and Intercreditor Agreement;
(vii) the Share Retention Agreement; and
(viii) any other documents or agreements in relation therewith, in implementation therewith, supplemental thereto on in replacement thereof; and
Transfer Agreement means the agreement dated after the date hereof but before the date of the first Additional Disbursement between Molinos Rio De La Plata and the Borrower providing that Molinos Rio De La Plata acknowledges the Cargill Acquisition and assigns the existing toll manufacturing contract between Cargill and Molinos Rio De La Plata to the Borrower.
World Bank means the International Bank for Reconstruction and Development, an international organization established by Articles of Agreement among its member countries.
1.02. Financial Calculations. (a) All financial calculations to be made under, or for the purposes of, this Agreement and any other Transaction Document shall be made in accordance with the Accounting Standards and, except as otherwise required in this Agreement or to conform to any provision of this Agreement, shall be calculated from the then most recently issued quarterly financial statements which the applicable Obligor is obligated to furnish to IFC under Section 5.03(a) (Reporting Requirements).
(b) Where quarterly financial statements from the last quarter of a Financial Year are used for the purpose of making certain financial calculations then, at IFCs option, those calculations may instead be made from the audited financial statements for such Financial Year.
(c) If a financial calculation is to be made under or for the purposes of this Agreement or any other Transaction Document on a Consolidated Basis, that calculation shall be made by reference to the sum of all amounts of similar nature reported in the relevant financial statements of each of the entities whose accounts are to be consolidated with the accounts of the applicable Obligor plus or minus the consolidation adjustments customarily applied to avoid double counting of transactions among any of those entities, including such Obligor.
1.03. Interpretation. In this Agreement, unless the context otherwise requires:
(a) headings are for convenience only and do not affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) a reference to an Annex, Article, party, Schedule or Section is a reference to that Article or Section of, or that Annex, party or Schedule to, this Agreement;
(d) a reference to a document includes an amendment or supplement to, or replacement or novation of, that document but disregarding any amendment, supplement, replacement or novation made in breach of this Agreement; and
(e) a reference to a party to any document includes that partys successors and permitted assigns.
1.04. Business Day Adjustment. (a) When an Interest Payment Date is not a Business Day, then such Interest Payment Date shall be automatically changed to the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
(b) When the day on or by which a payment (other than a payment of principal or interest) is due to be made is not a Business Day, that payment shall be made on or by the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
1.05. Existing Loans on the Effective Date. The Borrower and IFC agree that, effective at the time at which all conditions precedent to the effectiveness of this Agreement have been satisfied, (i) this Agreement shall amend and restate in its entirety the Existing Credit Agreement, (ii) the outstanding A Loans under (and as such quoted term is defined in) the Existing Credit Agreement shall remain outstanding under this Agreement and shall be A-1 Loans hereunder and (iii) the outstanding B Loans under (and as such quoted term is defined in) the Existing Credit Agreement shall remain outstanding under this Agreement and shall be B-1 Loans hereunder.
ARTICLE II
The Loan
2.01. The Additional Loan. Subject to the provisions of this Agreement, IFC agrees to lend, and the Borrower agrees to borrow, the Additional Loans consisting of:
(i) the A-2 Loan, being up to $30,000,000; and
(ii) the B-2 Loan, being up to $45,000,000
2.02. Disbursement Procedure. (a) The Borrower may request Additional Disbursements of the Additional Loans during the Availability Period by delivering to IFC, at least 10 Business Days prior to the proposed date of disbursement, an Additional Disbursement request substantially in the form of Schedule 2.
(b) Each Additional Disbursement shall be made by IFC at a bank in New York, New York for further credit to the Borrowers account at a bank in the Country as specified by the Borrower in the relevant Additional Disbursement request.
(c) The funds shall be converted into Pesos in accordance with Argentine laws and regulations.
(d) Each Additional Disbursement (other than the last one) shall be made in an amount of not less than $20,000,000. Each Additional Disbursement of the Additional Loans shall be allocated pro rata to the A-2 Loan and the B-2 Loan.
(e) The aggregate amount of the first Additional Disbursement shall not exceed $25,000,000.
(f) The Borrower shall deliver to IFC a receipt, substantially in the form of Schedule 3, within 5 Business Days following each Additional Disbursement.
2.03. Interest. Subject to the provisions of Section 2.04 (Default Rate Interest), the Borrower shall pay interest on the Loans in accordance with this Section 2.03:
(a) During each Interest Period, each Loan (or, with respect to the first Interest Period for each Additional Disbursement, the amount of that Additional Disbursement) shall bear interest at the applicable Interest Rate for that Interest Period.
(b) Interest on each A Loan and each B Loan shall accrue from day to day, be prorated on the basis of a 360-day year for the actual number of days in the relevant Interest Period and be payable in arrears on the Interest Payment Date immediately following the end of that Interest Period; provided that with respect to any Additional Disbursement made less than 15 days before an Interest Payment Date, interest on that Additional Disbursement shall be payable commencing on the second Interest Payment Date following the date of that Additional Disbursement.
(c) The A Loan Interest Rate and the B Loan Interest Rate for any Interest Period shall be the rate which is the sum of:
(i) the respective Relevant Spread; and
(ii) LIBOR on the Interest Determination Date for that Interest Period for 6 months (or, in the case of the first Interest Period for any Additional Disbursement, for 1 month, 2 months, 3 months or 6 months, whichever period is closest to the duration of the relevant Interest Period (or, if 2 periods are equally close, the longer one)) rounded upward to the nearest 3 decimal places.
(d) If, for any Interest Period, IFC cannot determine LIBOR by reference to the Reuters Service (or if the Reuters Service is not available, with reference to any other service (such as Bloomberg Financial Markets Service) that displays such rates as may be specified by IFC) or if the ICE (or NYSE Euronext, or any other applicable successor entity) for any reason ceases (whether permanently or temporarily) to publish interbank offered rates for deposits in the Loan Currency for the relevant Interest Period, IFC shall notify the Borrower, and shall instead determine LIBOR:
(i) on the second Business Day before the beginning of the relevant Interest Period by calculating the arithmetic mean (rounded upward to the nearest 3 decimal places) of the offered rates advised to IFC on or around 11:00 a.m., London time, for deposits in the Loan Currency and otherwise in accordance with Section 2.03(c)(ii), by any 4 major banks active in the Loan Currency in the London interbank market, selected by IFC; provided that if less than 4 quotations are received, IFC may rely on the quotations so received if not less than 2; or
(ii) if less than 2 quotations are received from the banks in London in accordance with subsection (i) above, on the first day of the relevant Interest Period, by calculating the arithmetic mean (rounded upward to the nearest 3 decimal places) of the offered rates advised to IFC on or around 11:00 a.m., New York time, for loans in the Loan Currency and otherwise in accordance with Section 2.03(c)(ii), by a major bank or banks in New York, New York selected by IFC.
(e) Subject to any alternative rate of interest agreed as contemplated by Section 2.03(f) below, if a Market Disruption Event occurs in relation to all or any part of the Loan for any Interest Period, IFC shall promptly notify the Borrower of such event and the relevant Interest Rate for the A Loans or the B Loans, or a portion of either, for that Interest Period shall be the rate which is the sum of:
(i) the respective Relevant Spread; and
(ii) either (A) the rate which expresses as a percentage rate per annum the cost to IFC (or the relevant Participant, as notified to IFC as soon as practicable and in any event not later than the close of business on the first day of the Relevant Interest Period) of funding its participation in the Loan from whatever source it may reasonably select or (B) at the option of IFC (or any such Participant, as the case may be), LIBOR for the relevant period as determined in accordance with Section 2.03(d)(ii) above.
(f) (i) If a Market Disruption Event occurs in relation to the Loan and the Borrower so requires, within 5 Business Days of the notification by IFC pursuant to Section 2.03(e) above, IFC and the Borrower shall enter into good faith negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest applicable to the Loan.
(ii) Any alternative basis agreed pursuant to sub-paragraph (i) above shall take effect in accordance with its terms and be binding on each party hereto.
(iii) If agreement cannot be reached, the Borrower may prepay the relevant portion of the Loan in accordance with Section 2.06(a).
(g) On each Interest Determination Date for any Interest Period, IFC shall determine the Interest Rate applicable to that Interest Period and promptly notify the Borrower of that rate.
(h) The determination by IFC, from time to time, of the applicable Interest Rate shall be final and conclusive and bind the Borrower (unless the Borrower shows to IFCs satisfaction that the determination involves manifest error).
2.04. Default Rate Interest. (a) Without limiting the remedies available to IFC under this Agreement or otherwise (and to the maximum extent permitted by applicable law), if the Borrower fails to make any payment of principal or interest (including interest payable pursuant to this Section) or any other payment provided for in Section 2.07 (Fees) when due as specified in this Agreement (whether at stated maturity or upon acceleration), the Borrower shall pay interest on the amount of that payment due and unpaid at the rate which shall be the sum of 2.0% per annum and the A Loan Interest Rate (with respect to amounts relating to the A Loans) or 2.0% per annum and the B Loan Interest Rate (with respect to amounts relating to the B Loans) in effect from time to time;
(b) Interest at the rate referred to in Section 2.04(a) shall accrue from the date on which payment of the relevant overdue amount became due until the date of actual payment of that amount (as well after as before judgment), and shall be payable on demand or, if not demanded, on each Interest Payment Date falling after any such overdue amount became due.
2.05. Repayment. (a) Subject to Section 1.04 (Business Day Adjustment), the Borrower shall repay the A-1 Loan on the following Interest Payment Dates and in the following amounts (determined based on the outstanding amount of the A-1 Loan on the first Interest Payment Date below):
Interest Payment Date |
|
Principal Amount Due |
|
|
|
March 15, 2018 |
|
1/13 |
September 15, 2018 |
|
1/13 |
March 15, 2019 |
|
1/13 |
September 15, 2019 |
|
1/13 |
March 15, 2020 |
|
1/13 |
September 15, 2020 |
|
1/13 |
March 15, 2021 |
|
1/13 |
September 15, 2021 |
|
1/13 |
March 15, 2022 |
|
1/13 |
September 15, 2022 |
|
1/13 |
March 15, 2023 |
|
1/13 |
September 15, 2023 |
|
1/13 |
March 15, 2024 |
|
1/13 |
(b) Subject to Section 1.04 (Business Day Adjustment), the Borrower shall repay the B-1 Loan on the following Interest Payment Dates and in the following amounts (determined based on the outstanding amount of the B-1 Loan on the first Interest Payment Date below):
Interest Payment Date |
|
Principal Amount Due |
|
|
|
September 15, 2017 |
|
1/8 |
March 15, 2018 |
|
1/8 |
September 15, 2018 |
|
1/8 |
March 15, 2019 |
|
1/8 |
September 15, 2019 |
|
1/8 |
March 15, 2020 |
|
1/8 |
September 15, 2020 |
|
1/8 |
March 15, 2021 |
|
1/8 |
(c) Subject to Section 1.04 (Business Day Adjustment), the Borrower shall repay the A-2 Loan on the following Interest Payment Dates and in the following amounts (determined based on the outstanding amount of the A-2 Loan on the first Interest Payment Date below):
Interest Payment Date |
|
Principal Amount Due |
|
|
|
September 15, 2018 |
|
1/13 |
March 15, 2019 |
|
1/13 |
September 15, 2019 |
|
1/13 |
March 15, 2020 |
|
1/13 |
September 15, 2020 |
|
1/13 |
March 15, 2021 |
|
1/13 |
September 15, 2021 |
|
1/13 |
March 15, 2022 |
|
1/13 |
September 15, 2022 |
|
1/13 |
March 15, 2023 |
|
1/13 |
September 15, 2023 |
|
1/13 |
March 15, 2024 |
|
1/13 |
September 15, 2024 |
|
1/13 |
(d) Subject to Section 1.04 (Business Day Adjustment), the Borrower shall repay the B-2 Loan on the following Interest Payment Dates and in the following amounts (determined based on the outstanding amount of the B-2 Loan on the first Interest Payment Date below):
Interest Payment Date |
|
Principal Amount Due |
|
|
|
March 15, 2018 |
|
1/8 |
September 15, 2018 |
|
1/8 |
March 15, 2019 |
|
1/8 |
September 15, 2019 |
|
1/8 |
March 15, 2020 |
|
1/8 |
September 15, 2020 |
|
1/8 |
March 15, 2021 |
|
1/8 |
September 15, 2021 |
|
1/8 |
(e) Upon each Additional Disbursement, the amount disbursed shall be allocated for repayment on each of the respective dates for repayment of principal set out in the tables in Section 2.05(a) through 2.05(d) in amounts which are pro rata to the amounts of the respective installments shown opposite those dates in those tables (with IFC adjusting those allocations as necessary so as to achieve whole numbers in each case).
(f) Any principal amount of the Loan repaid under this Agreement may not be re-borrowed.
2.06. Prepayment. Without prejudice to Sections 2.03 (Interest), Section 2.10 (Increased Costs), Section 2.14 (Taxes) and Section 2.16 (Illegality of Participation):
(a) the Borrower may prepay on any Interest Payment Date all or any part of the Loan, on not less than 30 days prior notice to IFC, but only if:
(i) the Borrower simultaneously pays all accrued interest and Increased Costs (if any) on the amount of the Loans to be prepaid, together with the prepayment premium specified in Section 2.06(b) payment of redeployment costs and all other amounts then due and payable under this Agreement, including the amount payable under Section 2.11 (Unwinding Costs), if the prepayment is not made on an Interest Payment Date;
(ii) for a partial prepayment, that prepayment is an amount not less than $10,000,000; and
(iii) if requested by IFC, the Borrower delivers to IFC, prior to the date of prepayment, evidence satisfactory to IFC that all necessary Authorizations with respect to the prepayment have been obtained.
(b) On the date of any prepayment of the Loans in accordance with Section 2.06(a), the Borrower shall pay a prepayment premium consisting of an amount in the Loan Currency equal to 2% of the amount to be prepaid. The determination by IFC of the prepayment premium shall be final and conclusive and bind the Borrower (unless the Borrower shows, to the satisfaction of IFC, that such determination involved manifest error).
(c) Amounts of principal prepaid under this Section shall:
(i) first be allocated by IFC pro rata between the A-1 Loan, the A-2 Loan, the B-1 Loan and the B-2 Loan in proportion to their respective principal amounts outstanding; and
(ii) then be applied by IFC to all the respective outstanding installments of principal of the A-1 Loan, the A-2 Loan, the B-1 Loan and the B-2 Loan in inverse order of maturity.
(d) Upon delivery of a notice in accordance with Section 2.06(a), the Borrower shall make the prepayment in accordance with the terms of that notice.
(e) Any principal amount of the Loans prepaid under this Agreement may not be reborrowed.
2.07. Fees. (a) The Borrower shall pay to IFC a non-refundable commitment fee:
(i) (A) with respect to the A-2 Loan, at the rate of 1.50% per annum on that part of the A Loan that from time to time has not been disbursed or cancelled, beginning to accrue on September 29, 2016 and ending on the last day of the Availability Period; and
(B) such commitment fee with respect to the A-2 Loan shall be due and payable semi-annually, in arrears, on each Interest Payment Date and shall be prorated on the basis of a 360-day year for the actual number of days elapsed.
(ii) (A) with respect to the B-2 Loan, at a rate of 1.50% per annum on that part of the B Loan that from time to time has not been disbursed or cancelled, beginning to accrue on the date of the Participation Agreement evidencing that Participation and ending on the last day of the Availability Period; and
(B) such commitment fee with respect to the B-2 Loan shall be due and payable semi-annually, in arrears, on each Interest Payment Date and shall be prorated on the basis of a 360-day year for the actual number of days elapsed.
(b) The Borrower shall also pay to IFC:
(i) a non-refundable front-end fee on the A-2 Loan of $375,000, to be paid on the earlier of (x) the date which is 30 days after the date of this Agreement and (y) the date immediately preceding the date of the first A-2 Loan Disbursement;
(ii) a non-refundable front-end fee on the B-1 Loan of $625,000, to be paid after January 1, 2017 but in no case later than March 31, 2017;
(iii) a non-refundable front-end fee on the B-2 Loan of $562,500, to be paid after January 1, 2017 but in no case later than March 31, 2017;
(iv) a non-refundable portfolio supervision fee of $15,000 per annum, payable upon receipt of a statement from IFC;
(v) the fees set forth in the IFC Fee Letter; and
(vi) if the Borrower and IFC agree to restructure all or part of the Loan, the Borrower and IFC shall negotiate in good faith an appropriate amount to compensate IFC for the additional work of IFC staff required in connection with such restructuring.
2.08. Currency and Place of Payments. (a) The Borrower shall make all payments of principal, interest, fees, and any other amount due to IFC under this Agreement in the Loan Currency, in same day funds, to the account of IFC at Northern Trust International Banking Corporation, New York, New York, U.S.A., ABA#026001122, for credit to IFCs account number 10215220300, or at such other bank or account in New York as IFC from time to time designates. Payments must be received in IFCs designated account no later than 1:00 p.m. New York time; and the Borrower hereby irrevocably agrees that IFC may deem any payment, or part thereof, relating to any B Loan that is received after that time as made on the next Business Day and accordingly interest will accrue on any Participants pro rata share of that payment with respect to which IFC is unable to make same day remittance to that Participant.
(b) The tender or payment of any amount payable under this Agreement (whether or not by recovery under a judgment) in any currency other than the Loan Currency shall not novate, discharge or satisfy the obligation of the Borrower to pay in the Loan Currency all amounts payable under this Agreement except to the extent that (and as of the date when) IFC actually receives funds in the Loan Currency in the account specified in, or pursuant to, Section 2.08(a).
(c) The Borrower shall indemnify IFC against any losses resulting from a payment being received or an order or judgment being given under this Agreement in any currency other than the Loan Currency or any place other than the account specified in, or pursuant to, Section 2.08(a). The Borrower shall, as a separate obligation, pay such additional amount as is necessary to enable IFC to receive, after conversion to the Loan Currency at a market rate and transfer to that account, the full amount due to IFC under this Agreement in the Loan Currency and in the account specified in, or pursuant to, Section 2.08(a).
(d) Notwithstanding the provisions of Section 2.08(a) and Section 2.08(b), IFC may require the Obligors to pay (or reimburse IFC) for any Taxes, fees, costs, expenses and other amounts payable under Section 2.14(a) (Taxes) and Section 2.15 (Expenses) in the currency in which they are payable, if other than the Loan Currency.
2.9. Allocation of Partial Payments. If at any time IFC receives less than the full amount then due and payable to it under this Agreement, IFC may allocate and apply the amount received in any way or manner and for such purpose or purposes under this Agreement as IFC in its sole discretion determines, notwithstanding any instruction that the Borrower may give to the contrary.
2.10. Increased Costs.
(a) On each Interest Payment Date, the Borrower shall pay, in addition to interest, the amount which IFC from time to time notifies to the Borrower in an Increased Costs Certificate as being the aggregate Increased Costs of IFC and each Participant accrued and unpaid prior to that Interest Payment Date.
(b) If the Borrower is required to pay any Increased Costs pursuant to Section 2.10(a), it may prepay, in whole but not in part, that part of the Loans with respect to which the Increased Costs are being incurred. Such prepayment shall be made in accordance with Section 2.06 (Prepayment) except that the provisions with respect to the minimum prepayment amount set forth in Section 2.06(a)(ii), the prepayment premium set forth in Section 2.06(b) and the allocation of the principal amount prepaid set forth in Section 2.06(c) shall not apply.
2.11. Unwinding Costs. (a) If IFC or any Participant incurs any cost, expense or loss as a result of:
(i) the Borrower failing to borrow in accordance with a request for Additional Disbursement made pursuant to Section 2.02 (Disbursement Procedure);
(ii) the Borrower failing to prepay in accordance with a notice of prepayment;
(iii) the Borrower prepaying all or any portion of the Loans on a date other than an Interest Payment Date; or
(b) after acceleration of the Loan, the Borrower paying all or a portion of the Loans on a date other than an Interest Payment Date;
then the Borrower shall compensate IFC for the amount that IFC from time to time notifies to the Borrower as being the amount of those costs, expenses and losses incurred. A certificate of IFC setting forth any amount or amounts that IFC is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay IFC the amount shown as due on any such certificate immediately after receipt thereof.
(c) For the purposes of this Section, costs, expenses or losses include any premium, penalty or expense incurred to liquidate or obtain third party deposits, borrowings, hedges or swaps in order to make, maintain, fund or hedge all or any part of any Additional Disbursement or prepayment of the Loan, or any payment of all or part of the Loans upon acceleration.
2.12. Suspension or Cancellation by IFC. (a) IFC may, by notice to the Borrower, suspend the right of the Borrower to request Additional Disbursements or cancel the undisbursed portion of the Loans in whole or in part:
(i) if any Event of Default has occurred and is continuing or if the Event of Default specified in Section 6.02(f) (Events of Default) is, in the reasonable opinion of IFC, imminent; or
(ii) if any event or condition has occurred which has or can be reasonably expected to have a Material Adverse Effect.
(b) Unless IFC shall notify the Borrower in writing to the contrary, the undisbursed portion of the Additional Loans will be cancelled at the end of the Availability Period.
(c) Upon occurrence of any of the events in clauses (a) or (b), the right of the Borrower to any further Additional Disbursement shall be suspended or cancelled, as the case may be. The exercise by IFC of its right of suspension shall not preclude IFC from exercising its right of cancellation, either for the same or any other reason specified in Section 2.12(a) and shall not limit any other provision of this Agreement. Upon any cancellation the Borrower shall, subject to paragraph (c) of this Section 2.12, pay to IFC all fees and other amounts accrued (whether or not then due and payable) under this Agreement up to the date of that cancellation. A suspension shall not limit any other provision of this Agreement.
(d) In the case of partial cancellation of the Additional Loans pursuant to paragraph (a) of this Section 2.12, or Section 2.13(a), interest on the amount then outstanding of the Additional Loans remains payable as provided in Section 2.03 (Interest).
2.13. Cancellation by the Borrower. (a) The Borrower may, by notice to IFC, irrevocably request IFC to cancel the undisbursed portion of the Additional Loans on the date specified in that notice (which shall be a date not earlier than 30 days after the date of that notice).
(b) IFC shall, by notice to the Borrower, cancel the undisbursed portion of the Additional Loans effective as of that specified date if, subject to Section 2.12(c), IFC has received all fees and other amounts accrued (whether or not then due and payable) under this Agreement up to such specified date.
(c) Any portion of the Additional Loans that is cancelled under this Section 2.13 may not be reinstated or disbursed.
2.14. Taxes. (a) The Obligors shall pay or cause to be paid all Taxes (other than taxes, if any, payable on the overall income of IFC) on or in connection with the payment of any and all amounts due under this Agreement that are now or in the future levied or imposed by any Authority of the Country or any jurisdiction through or out of which a payment is made.
(b) All payments of principal, interest, fees and other amounts due under this Agreement shall be made without deduction for or on account of any Taxes.
(c) If the Obligors are prevented by operation of law or otherwise from making or causing to be made those payments without deduction, the principal or (as the case may be) interest, fees or other amounts due under this Agreement shall be increased to such amount as may be necessary so that IFC receives the full amount it would have received (taking into account any Taxes payable on amounts payable by the Obligors under this subsection) had those payments been made without that deduction.
(d) If Section 2.14(c) applies and IFC so requests, the Obligors shall deliver to IFC official tax receipts evidencing payment (or certified copies of them) within 30 days of the date of that request.
(e) Section 2.14(a) and Section 2.14(b) do not apply to Taxes which directly result from a Participant (or, as the case may be, a participant with a comparable participation in any A Loan) having its principal office in the Country or having or maintaining a permanent office or establishment in the
Country, if and to the extent that such permanent office or establishment acquires the relevant Participation (or a comparable participation in any A Loan).
2.15. Expenses. (a) The Borrower shall pay or, as the case may be, reimburse IFC or its assignees any amount paid by them on account of, all taxes (including stamp taxes), duties, reasonable fees or other charges payable on or in connection with the execution, issue, delivery, registration or notarization of the Transaction Documents and any other documents related to this Agreement or any other Transaction Document.
(b) The Borrower shall pay to IFC or as IFC may direct:
(i) the reasonable fees and expenses of IFCs technical consultants incurred in connection with the investment by IFC provided for under this Agreement;
(ii) the reasonable and documented fees and expenses of IFCs counsel in the Country and the United States (New York) incurred in connection with:
(A) the preparation of the investment by IFC provided for under this Agreement and any other Transaction Document;
(B) the preparation and/or review, execution and, where appropriate, translation and registration of the Transaction Documents and any other documents related to them;
(C) the giving of any legal opinions required by IFC under this Agreement and any other Transaction Document;
(D) the administration by IFC of the investment provided for in this Agreement or otherwise in connection with any amendment, supplement or modification to, or waiver under, any of the Transaction Documents;
(E) the registration (where appropriate) and the delivery of the Notes relating to the Loans and their disbursement;
(F) the occurrence of any Event of Default or Potential Event of Default; and
(G) the release of the IFC Security following repayment in full of the Loan; and
(iii) the costs and expenses incurred by IFC in connection with a secure web-based electronic syndication system used by IFC to syndicate any B Loan; and
(c) the costs and expenses incurred by IFC in relation to efforts to enforce or protect its rights under any Transaction Document, or the exercise of its rights or powers consequent upon or arising out of the occurrence of any Event of Default or Potential Event of Default, including reasonable legal and other professional consultants fees on a full indemnity basis.
2.16. Illegality of Participation. If, after the date of this Agreement, any change made in any applicable law or regulation or official directive (or its interpretation or application by any Authority charged with its administration) (herein the Relevant Change) makes it unlawful for any Participant to continue to maintain or to fund its Participation:
(a) the Borrower shall, upon request by IFC (but subject to any applicable Authorization having been obtained), on the earlier of (x) the next Interest Payment Date and (y) the date that IFC advises the Borrower is the latest day permitted by the Relevant Change, prepay in full that part of a B Loan that IFC advises corresponds to that Participation;
(b) concurrently with the prepayment of the part of a B Loan corresponding to the Participation affected by the Relevant Change, the Borrower shall pay all accrued interest, Increased Costs (if any) on that part of such B Loan (and, if that prepayment is not made on an Interest Payment Date, any amount payable in respect of the prepayment under Section 2.11 (Unwinding Costs));
(c) the Borrower agrees to take all reasonable steps to obtain, as quickly as possible after receipt of IFCs request for prepayment, the Authorization referred to in Section 2.16(a) if any such Authorization is then required; and
(d) the Borrower shall have no further right to disbursement of the undisbursed portion of a B Loan corresponding to that Participation after it has received IFCs request for prepayment under this Section.
2.17. The Notes.
(a) In connection with and at the time of each Additional Disbursement, the Borrower shall execute and deliver to IFC a non-endorsable promissory note (pagaré), payable on demand, for, and in the principal amount of, each Additional Disbursement and dated the date on which the Borrower receives that Additional Disbursement (each such promissory note, a Note), which shall (i) be in the form attached hereto as of Schedule 4 appropriately completed, (ii) be executed por aval by Cañuelas Pack and each Subsidiary Guarantor, (iii) have the signatures and capacities of the applicable Obligors representatives duly certified and authenticated by an Argentinean notary public acting within its capacities, and (iv) comply with all other conditions required by the laws of the Country to constitute, at all times, a título ejecutivo and deliver it to IFC.
(b) Neither the execution and delivery of this Agreement, nor the issuance of any of the Notes provided for hereunder is intended to, and shall hence not, constitute a novation of any of the Loans (including, without limitation, the Initial Loans), nor of any of the Obligors obligations hereunder or any of the other Transaction Documents.
(c) Each Obligor represents and agrees that at the time of delivery of each Note, each Note shall constitute in the Country a valid binding and enforceable obligation of such Obligor in accordance with its terms. If IFC so requests, such Obligor shall furnish to IFC evidence satisfactory to IFC that all formalities required for that purpose have been satisfied. Each Obligor hereby jointly and severally agrees to indemnify IFC for all costs and expenses associated with the enforcement of the Notes.
ARTICLE III
Representations and Warranties
3.01. Representations and Warranties. Each Obligor represents and warrants that:
(a) Organization and Authority. Each of the Obligors and each of its Subsidiaries is a company (a sociedad anónima) duly incorporated and validly existing under the laws of the jurisdiction of its organization and has the corporate power and has obtained all required Authorizations to own its
assets, conduct its business as presently conducted and to enter into, and comply with its obligations under, the Transaction Documents to which it is a party or will, in the case of any Transaction Document not executed as at the date of this Agreement, when that Transaction Document is executed, have the corporate power to enter into, and comply with its obligations under, that Transaction Document;
(b) Validity. Each Transaction Document to which any Obligor or any Subsidiary is a party has been, or will be, duly authorized and executed by such Person and constitutes, or will, when executed constitute, a valid and legally binding obligation of such Person, enforceable in accordance with its terms, and none of the agreements listed in Section 4.02(a) (Conditions of First Disbursement) has been, or will be, amended or modified except as permitted under this Agreement;
(c) No Conflict. Neither the making of any Transaction Document to which any Obligor is a party nor (when all the Authorizations referred to in Section 4.02(d) (Conditions of First Disbursement) have been obtained) the compliance with its terms will conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default or require any consent under, any indenture, mortgage, agreement or other instrument or arrangement to which such Person or its Subsidiaries is a party or by which it or its Subsidiaries is bound, or violate any of the terms or provisions of such Persons Charter or any of its Subsidiaries Charters or any Authorization, judgment, decree or order or any statute, rule or regulation applicable to such Person or to any of its Subsidiaries;
(d) Status of Authorizations. To the best of each Obligors knowledge after due inquiry, the Authorizations specified in Annex B are all the Authorizations (other than Authorizations that are of a routine nature and are obtained in the ordinary course of business) needed by any Obligor or any of their respective Subsidiaries to conduct its business, carry out the Transactions and comply with its obligations under this Agreement and each of the other Transaction Documents to which it is a party and those Authorizations have all been obtained and are in full force and effect;
(e) No Amendments to Charter. The Charter of each Obligor has not been amended since May 13, 2003;
(f) No Immunity. No Obligor nor any of their respective Subsidiaries nor any of their respective property enjoys any right of immunity from set-off, suit or execution with respect to their respective assets or their respective obligations under any Transaction Document;
(g) Disclosure. The Information Memorandum dated February 2016 relating to each Obligor and its Subsidiaries was and continues to be true and accurate (other than for projections and other forward-looking statements contained in that Information Memorandum which the Obligors believe to be reasonable) and does not contain any information which is misleading in any material respect nor does it omit any information the omission of which makes the information contained in it misleading in any material respect;
(h) Financial Condition. Since November 30, 2015, no Obligor nor any of their respective Subsidiaries:
(i) has suffered any change that has a Material Adverse Effect or incurred any substantial loss or liability;
(ii) has undertaken or agreed to undertake any substantial obligation;
(i) Financial Statements. The Consolidated and unconsolidated financial statements of each Obligor and its Subsidiaries for the period ending on November 30, 2015:
(i) have been prepared in accordance with the Accounting Standards, and present fairly the financial condition of such Obligor and its Subsidiaries as of the date as of which they were prepared and the results of the operations of such Obligor and its Subsidiaries during the period then ended;
(ii) disclose all liabilities (contingent or otherwise) of such Obligor and its Subsidiaries, and the reserves, if any, for such liabilities and all unrealized or anticipated liabilities and losses arising from commitments entered into by such Obligor or any of its Subsidiaries (whether or not such commitments have been disclosed in such financial statements);
(j) Employee Benefit Plans. Neither of the Obligors nor their respective Subsidiaries has any employee benefit plans;
(k) Title to Assets and Permitted Liens. Each of the Obligors and their respective Subsidiaries has good and marketable title to all of the assets purported to be owned by it and possesses a valid leasehold interest in all assets which it purports to lease, in all cases free and clear of all Liens, other than Permitted Liens, and no contracts or arrangements, conditional or unconditional, exist for the creation by any Obligor or any of their respective Subsidiaries of any Lien, except for the IFC Security;
(1) IFC Security.
(i) The provisions of the Cañuelas / Adelia Maria Security Documents are effective to create, in favor of IFC, legal, valid and enforceable Liens on or in all of the assets and rights covered by the Cañuelas / Adelia Maria Security Documents; and, except for the filing of the Cañuelas / Adelia Maria Amendatory Security Documents, all recordings and filings have been made in all public offices, all necessary consents obtained and all other action has been taken so that the Liens created by each Cañuelas / Adelia Maria Security Document will constitute the Applicable Priority Security Interest in all assets and rights subject to the Cañuelas / Adelia Maria Security Documents;
(ii) The provisions of the Spegazzini Security Documents are effective to create, in favor of IFC, legal, valid and enforceable Liens on or in all of the assets and rights covered by the Spegazzini Security Documents; and, except for the filing of the Spegazzini Amendatory Security Documents, all recordings and filings have been made in all public offices, all necessary consents obtained and all other action has been taken so that the Liens created by each Spegazzini Security Document will constitute the Applicable Priority Security Interest in all assets and rights subject to the Spegazzini Security Documents;
(iii) Upon execution and delivery of the Pilar Security Documents, the provisions of the Pilar Security Documents are effective to create, in favor of IFC, legal, valid and enforceable Liens on or in all of the assets and rights covered by the Pilar Security Documents; and all recordings and filings have been made in all public offices, all necessary consents obtained and all other action has been taken so that the Liens created by each Pilar Security Document will constitute the Applicable Priority Security Interest in all assets and rights subject to the Pilar Security Documents;
(iv) Upon execution and delivery of the Rosario Security Documents, the provisions of the Rosario Security Documents are effective to create, in favor of IFC, legal, valid and enforceable Liens on or in all of the assets and rights covered by the Rosario Security Documents; and all recordings and filings have been made in all public offices, all necessary consents
obtained and all other action has been taken so that the Liens created by each Rosario Security Document will constitute the Applicable Priority Security Interest in all assets and rights subject to the Rosario Security Documents;
(m) Financial Debt. Annex D sets forth all Financial Debt of the Obligors and their respective Subsidiaries as of the date hereof, and there exists no outstanding default under any Financial Debt of the Obligors or their respective Subsidiaries;
(n) Taxes. All tax returns and reports of each of the Obligors and their respective Subsidiaries required by law to be filed have been duly filed and all Taxes, obligations, fees and other governmental charges upon any Obligor or any of its Subsidiaries, or their respective properties, income or assets, which are due and payable or to be withheld, have been paid or withheld, other than those presently payable without penalty or interest, except Taxes, obligations, fees and other governmental charges that are being contested in good faith by appropriate proceedings and for which the applicable Obligor, has set aside on its books adequate reserves;
(o) Litigation. No Obligor nor any of its Subsidiaries is engaged in nor, to the best of such Obligors knowledge, after due inquiry, threatened by, any litigation, arbitration or administrative proceedings, the outcome of which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;
(p) Compliance with Law.
(i) To the best of each Obligors knowledge and belief, after due inquiry, no Obligor nor any of their respective Subsidiaries is in violation of any statute or regulation of any Authority in connection with the conduct of its respective business or ownership of its respective property; and
(ii) No judgment or order has been issued which has or may reasonably be expected to have a Material Adverse Effect;
(q) Environmental Matters.
(i) To the best of its knowledge and belief, after due inquiry, there are no material social or environmental risks or issues in respect of its or any of its Subsidiaries Operations other than those identified by the S&EA; and
(ii) Neither it nor any of its Subsidiaries has received nor is it or any of its Subsidiaries aware of (i) any existing or threatened complaint, order, directive, claim, citation or notice from any Authority or (ii) any material written communication from any Person, in either case, concerning its Operations failure to comply with any matter covered by the Performance Standards which has, or could reasonably be expected to have, a Material Adverse Effect or any material impact on the implementation or operation of its Operations in accordance with the Performance Standards;
(r) Labor Matters. There are no ongoing or, to the best knowledge of each Obligor after due inquiry, threatened, strikes, slowdowns or work stoppages by employees of any Obligor or any of their respective Subsidiaries;
(s) Use of Proceeds. The proceeds of the Loans shall be utilized to consummate the Transactions;
(t) Subsidiaries. Annex E correctly sets forth, as of the date hereof and the date of the first Additional Disbursement, the Subsidiaries of each Obligor and the percentage ownership (direct and indirect) of each holder in each class of capital stock of each Obligor, and the direct owner thereof;
(u) Sanctionable Practices. No Obligor, nor any of their respective Subsidiaries or Affiliates, nor any Person acting on its or any of their behalf, has committed or engaged in, with respect to any of their respective Operations or any transaction contemplated by this Agreement, any Sanctionable Practice;
(v) UN Security Council Resolutions. The Obligors have neither entered into any transaction nor engaged in any activity prohibited by any resolution of the United Nations Security Council under Chapter VII of the United Nations Charter; and
(w) No Material Omissions. None of the representations and warranties in this Section 3.01 omits any matter the omission of which makes any of such representations and warranties misleading.
3.02. IFC Reliance. Each Obligor acknowledges that it makes the representations and warranties in Section 3.01 with the intention of inducing IFC to enter into this Agreement and the other Transaction Documents (and the Participants to enter into the Participation Agreement) and that IFC enters into this Agreement and the other Transaction Documents (and the Participants will enter into the Participation Agreement) on the basis of, and in full reliance on, each of such representations and warranties.
ARTICLE IV
Conditions of Disbursement
4.01. Conditions of Effectiveness. This Agreement will become effective on the date on which IFC shall have received the following:
(a) Loan Agreement. This Agreement, in form and substance satisfactory to IFC, has been entered into by all parties; and
(b) Participation Agreement. IFC has entered into Participation Agreements with Participants for the acquisition by them of Participations in B Loans in an aggregate amount equal to the full amount of the B Loans and the Participation Agreement is in full force and effect.
4.02. Conditions of First Disbursement. The obligation of IFC to make the first Additional Disbursement is subject to the fulfillment prior to or concurrently with the making of that first Additional Disbursement of the following conditions:
(a) Transaction Documents. All Transaction Documents, each in form and substance satisfactory to IFC, have been entered into by all parties to them and have become (or, as the case may be, remain) unconditional and fully effective in accordance with their respective terms (except for the Notes, each of which will become unconditional and fully effective on the date of the applicable Additional Disbursement), and IFC has received a copy of each of those agreements to which it is not a party;
(b) Security. (i) The Pilar Security Documents and the Rosario Security Documents have been duly presented to the applicable registries for filing to create the Applicable Priority Security Interest in all assets and rights subject to the Pilar Security Documents and the Rosario Security Documents; and (ii) the Cañuelas / Adelia Maria Amendatory Security Documents and the Spegazzini Amendatory Security Documents have been duly presented to the applicable registries for filing to extend the coverage provided for therein with respect to the A-2 Loan and the B-2 Loan.
(c) Share Retention Agreement. A confirmation of the Share Retention Agreement, in form and substance satisfactory to IFC, shall have been executed by the Current Shareholders, the Borrower and Cañuelas Pack.
(d) Authorizations. Each Obligor has obtained, and provided to IFC copies of, all Authorizations listed in Annex B, and such other Authorizations that may become necessary for:
(i) the Loan;
(ii) the Obligors and their Operations;
(iii) the due execution, delivery, validity and enforceability of, and performance by each Obligor of its respective obligations under, this Agreement and the other Transaction Documents, and any other documents necessary or desirable to the implementation of any of those agreements or documents; and
(iv) the remittance to IFC or its assigns in Dollars of all monies payable with respect to the Transaction Documents;
and all those Authorizations are in full force and effect;
(e) Legal Opinions. IFC has received (i) a legal opinion from FGM Abogados, IFCs counsel in the Country, concurred in by counsel for the Obligors, and covering such matters relating to the transactions contemplated by this Agreement as IFC may reasonably request; and (ii) a legal opinion from Mayer Brown LLP, IFCs counsel in New York, with regard to the New York law aspects of this Agreement;
(f) CFO Certificate. IFC shall have received a certificate of the Borrowers chief financial officer certifying that, as at a date within 60 days prior to the date of first Additional Disbursement, each Obligor was in compliance with the provisions of Section 5.01(c) (Affirmative Covenants) and containing a brief description of the systems and records in place;
(g) Insurance. IFC has received copies of all insurance policies required to be obtained pursuant to Section 5.04 (Insurance) and Annex F prior to the date of first Additional Disbursement, and a certification of the Obligors and their Subsidiaries insurers or insurance agents confirming that such policies are in full force and effect and all premiums then due and payable under those policies have been paid;
(h) Fees. IFC has received the fees which Section 2.07 (Fees) requires to be paid before the date of the first Additional Disbursement;
(i) Legal Fees and Expenses. IFC has received the reimbursement of all reasonable and invoiced fees and expenses of IFCs counsel as provided in Section 2.15(b)(ii) or confirmation that those fees and expenses have been paid directly to that counsel;
(j) Solvency. IFC has received a solvency certificate in the form of Schedule 5 from the chief financial officer of each Obligor;
(k) Appointment of Agent. Each Obligor has delivered to IFC evidence, substantially in the form of Schedule 6, of appointment of an agent for service of process pursuant to Section 8.05 (Enforcement); and
(1) Environmental Matters. The Borrower has completed an S&EA and delivered to IFC an Action Plan, each in form and substance acceptable to IFC.
(m) Transfer Agreement. IFC has received an executed copy of the Transfer Agreement.
4.03. Conditions of All Disbursements.
(a) The obligation of IFC to make any Additional Disbursement, including the first Additional Disbursement, is also subject to the conditions that:
(i) No Default. No Event of Default and no Potential Event of Default has occurred and is continuing;
(ii) Use of Proceeds. The proceeds of that Additional Disbursement are, at the date of the relevant request, needed by the Borrower for the purposes described in Section 3.01(s), or will be needed for that purpose within 3 months of that date;
(iii) No Material Adverse Effect. Since the date of this Agreement nothing has occurred which has or could reasonably be expected to have a Material Adverse Effect;
(iv) No Material Loss or Liability. Since the date of this Agreement no Obligor nor any of their respective Subsidiaries have incurred any material loss or liability (except such liabilities as may be incurred in accordance with Section 5.02 (Negative Covenants));
(v) Representations and Warranties. The representations and warranties made in Article III are true and correct in all material respects on and as of the date of that Additional Disbursement with the same effect as if those representations and warranties had been made on and as of the date of that Additional Disbursement (but in the case of Section 3.01(c) (Representations and Warranties), without the words in parentheses);
(vi) Legal Opinions. IFC has received (if it so requires) a legal opinion or opinions in form and substance satisfactory to IFC, of IFCs counsel in the Country, and, if requested by IFC, concurred in by counsel for the Obligors, with respect to any matters relating to that Additional Disbursement;
(vii) No Violations. After giving effect to that Additional Disbursement, no Obligor would be in violation of:
(A) its Charter;
(B) any provision contained in any document to which it is a party (including this Agreement and the Security Documents) or by which it is bound; or
(C) any law, rule, regulation, Authorization or agreement or other document binding on it directly or indirectly limiting or otherwise its borrowing or guarantee power or authority or its ability to borrow or guarantee;
(viii) Financial Ratios. (Without limiting the generality of Section 4.03(a)(vii), after taking into account the amount of that Additional Disbursement and any other Long-term Debt incurred by the Borrower and of any amounts of Tangible Net Worth paid into the Borrower after the date of the latest financial statements of the Borrower delivered to IFC pursuant to Section 5.03(a) (Reporting Requirements) (or, in the case of the first Additional Disbursement, the latest financial statements of the Borrower delivered to IFC pursuant to Section 5.03(a) of the Existing Loan Agreement):
(ix) the Borrower is in compliance with the ratios set forth in Section 5.01(n); and
(x) the Prospective Debt Service Coverage Ratio of the Borrower, on a Consolidated Basis, would not be less than (x) if such Additional Disbursement is made during Financial Year 2016, 1.2 to 1.0 and (y) is such Additional Disbursement is made during Financial Year 2017, 1.4 to 1.0;
provided that, with respect to any Additional Disbursement requested to be made prior to the date when the first financial statements to be delivered to IFC pursuant to Section 5.03(a) (Reporting Requirements) would be due, the calculation of the ratios set forth in clauses (i) and (ii) above shall be made on the basis of such information as IFC may reasonably request, verified, if IFC so requires, by the Auditors;
(xi) Fees and Expenses. IFC shall have received the reimbursement of all reasonable and invoiced fees and expenses of IFCs counsel as provided in Section 2.15(b)(ii) or confirmation that those fees and expenses have been paid directly to that counsel;
(xii) CFO Certificate. IFC shall have received a certificate of the Borrowers chief financial officer certifying that in the 3 months prior to such Additional Disbursement, the Borrower has received revenues of at least $142,000,000 with EBITDA of the Borrower for the previous 3 months was at least $12,500,000;
(xiii) CAGSA Representation. IFC shall have received a certificate from Compañia Argentina de Granos S.A. (CAGSA) and an Authorized Representative of the Borrower that no Event of Default or potential Event of Default exists under any Financial Debt of CAGSA (including the Existing Guarantees);
(xiv) Action Plan. All actions required to be completed as condition for such Additional Disbursement under the Action Plan have been completed to IFCs satisfaction;
(xv) The Notes. IFC has received 1 or more Notes, as applicable, in the form attached as Schedule 4 in accordance with Section 2.17 (The Notes);
(xvi) Environmental Matters. All material actions required to be completed at the time of that Additional Disbursement under the Action Plan have been completed to IFCs satisfaction; and
(b) Conditions to Second Additional Disbursement. In addition to the foregoing, the obligation of IFC to make the second Additional Disbursement is also subject to the condition that IFC has received evidence satisfactory to it that the Rabobank Debt has been paid in full.
4.04. Borrowers Certification. The Borrower shall deliver to IFC with respect to each request for Additional Disbursement:
(a) certifications, in the form included in Schedule 2, relating to the conditions specified in Section 4.03 (Conditions of All Disbursements) (other than the condition in Section 4.03(a)(vii)) expressed to be effective as of the date of that Additional Disbursement); and
(b) such evidence as IFC may reasonably request of the proposed utilization of the proceeds of that Additional Disbursement or the utilization of the proceeds of any prior Additional Disbursement.
4.05. B Loan Conditions. Notwithstanding any other provision of this Agreement, IFC is not obliged to make:
(a) any B-2 Loan Disbursement, except to the extent that the Participants provide funds for that B-2 Loan Disbursement under their Participations; and
(b) any Additional Disbursement except pro rata from the A-2 Loan and the B-2 Loan.
4.06. Conditions for IFC Benefit. The conditions in Section 4.01 through Section 4.05 are for the benefit of IFC and may be waived only by IFC in its sole discretion.
ARTICLE V
Particular Covenants
5.01. Affirmative Covenants. Unless IFC otherwise agrees in writing, each Obligor shall, and shall cause each of its Subsidiaries to:
(a) Corporate Existence; Conduct of Business. Do all things necessary to maintain its existence and keep in full force and effect its material rights, franchises, licenses, permits, copyrights, trademarks and patents, comply with its charter, conduct its Operations with due diligence and efficiency and in accordance with sound industry, financial and business practices;
(b) Use of Proceeds; Compliance with Law. Apply the proceeds of the Loans exclusively as set forth in Section 3.01(s), comply in all material respects (or, in the case of Applicable S&E Law, in all respects) with all applicable law, statutes, regulations (including, without limitation, foreign exchange regulations) and orders of, and all applicable restrictions imposed by, all Authorities in respect of its Operations and the ownership of its property (including applicable law, statutes, regulations, orders and restrictions relating to environmental standards and controls);
(c) Accounting and Financial Management. Maintain an accounting and control system, management information system and books of account and other records, which together adequately reflect truly and fairly the financial condition of each Obligor and its Subsidiaries and the results of their respective operations in conformity with the Accounting Standards;
(d) Taxes. Pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any properties belonging to it; provided that no Obligor nor any of their respective Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with the Accounting Standards;
(e) Auditors. Maintain at all times a firm of internationally recognized independent public accountants acceptable to IFC as auditors of the Obligors and their Subsidiaries;
(f) Authorization to Auditors. Irrevocably authorize, in the form of Schedule 7, the Auditors (whose fees and expenses shall be for the account of such Obligor) to communicate directly with IFC at any time regarding such Obligors or any of its Subsidiarys accounts and operations, and provide to IFC a copy of that authorization, and, no later than 30 days after any change in Auditors, issue a similar authorization to the new Auditors and provide a copy thereof to IFC;
(g) Access. Upon IFCs request and with reasonable prior notice to the applicable Obligor, permit representatives of IFC and the Compliance Advisor/Ombudsman (CAO), during normal office hours, to:
(i) visit any of the sites and premises where the business of such Obligor or any of its Subsidiaries is conducted;
(ii) inspect any sites, facilities, plants and equipment of such Obligor and any of its Subsidiaries;
(iii) have access to the books of account and all records and any of its Subsidiaries; and
(iv) have access to those employees, agents, contractors and subcontractors of such Obligor and any of its Subsidiaries who have or may have knowledge of matters with respect to which IFC seeks information;
provided that (i) no such reasonable prior notice shall be necessary if an Event of Default or Potential Event of Default is continuing or if special circumstances so require and (ii) in the case of the CAO, such access shall be for the purpose of carrying out the CAOs role;
(h) Environmental Matters. Undertake its respective Operations in compliance with (i) the Action Plan and (ii) the applicable requirements of the Performance Standards;
(i) Review of Annual Monitoring Report. Periodically review the form of the Annual Monitoring Report and advise IFC as to whether revision of the form is necessary or appropriate in light of changes to such Obligors or its Subsidiaries Operations, or in light of environmental or social risks identified by the Obligors S&E Management Systems; and revise the form as agreed with IFC;
(j) S&E Management System. Use all reasonable efforts to ensure the continuing operation of the S&E Management System to assess and manage the social and environmental performance of the Obligors and their Subsidiaries Operations in compliance with the Performance Standards;
(k) Authorizations.
(i) obtain and maintain in force (and where appropriate, renew in a timely manner) all Authorizations, including without limitation the Authorizations specified in Annex B, which are necessary for the implementation of the Transactions, the carrying out of the business and Operations of each Obligor and its Subsidiaries generally and the compliance by each Obligor and its Subsidiaries with all their respective obligations under the Transaction Documents; and
(ii) comply with all the conditions and restrictions contained in, or imposed on each Obligor or any of its Subsidiaries by, those Authorizations;
(1) Security; Further Assurances.
(i) Take such actions as are necessary or as IFC may reasonably request from time to time to ensure that the Guaranteed Obligations are guaranteed by each Material Subsidiary;
(ii) From time to time, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such further instruments as may reasonably be requested by IFC (including notarization by a Notary Public of the Country acceptable to IFC of any of the Security Documents) (A) for perfecting or maintaining in full force and effect the IFC Security or for re-registering the IFC Security or otherwise and, if necessary, create and perfect additional IFC Security, in each case, with the Applicable Priority Security Interest, and (B) to enable each Obligor and its Subsidiaries to comply with their respective obligations under the Transaction Documents;
(iii) No later than 30 days after any existing Subsidiary becomes a Material Subsidiary or the formation or acquisition of a Material Subsidiary, subject to applicable law, the Original Obligors will cause each such Material Subsidiary (x) to become a Subsidiary Guarantor by executing and delivering to IFC a Subsidiary Guarantee and (y) to provide other customary documentation requested by IFC, including a Certificate of Incumbency and Authority, together with copies of the Charter, by-laws, resolutions and powers of attorney referred to in such Certificate of Incumbency and Authority, in each case, in form and substance satisfactory to IFC.
(iv) On or before the date that is 90 days after the first Additional Disbursement, take such actions as are necessary or as IFC may reasonably request to ensure that all recordings and . filings have been made in all public offices, all necessary consents obtained and all other action has been taken so that (a) the Liens created by each Cañuelas / Adelia Maria Security Document continue to constitute the Applicable Priority Security Interest in all assets and rights subject to the Cañuelas / Adelia Maria Security Documents and their respective coverage extended to secure all obligations with respect to the A-2 Loan and the B-2 Loan, as applicable; (b) the Liens created by each Spegazzini Security Document continue to constitute the Applicable Priority Security Interest in all assets and rights subject to the Spegazzini Security Documents and their respective coverage extended to secure all obligations with respect to the A-2 Loan and the B-2 Loan, as applicable; (c) the Liens created by each Pilar Security Document constitute the Applicable Priority Security Interest in all assets and rights subject to the Pilar Security Documents; and (d) the Liens created by each Rosario Security Document constitute the Applicable Priority Security Interest in all assets and rights subject to the Rosario Security Documents;
(v) On or before the date that is 60 days after the Cargill Acquisition, provide IFC with all insurance policies required to be obtained pursuant to Section 5.04 (Insurance) Ñwith respect to the assets purchased as part of the Cargill Acquisition.
(m) Appraisals. Deliver to IFC, on approximately the 2nd and 4th anniversary of the date hereof, appraisals of the assets subject to the Security Documents from one or more firms satisfactory to IFC, which appraisals shall be satisfactory to IFC in its sole discretion;
(n) Borrower Financial Ratios. With respect to the Borrower and its Subsidiaries, maintain:
(i) at all times, a Current Ratio of at least 1.2 to 1.0;
(ii) a Net Financial Debt to EBITDA Ratio, on a Consolidated Basis, of not more than, for the Financial Quarter ending (A) May 31, 2016, 4.0 to 1.0, (B) November 30, 2016, 3.0 to 1.0, (C) May 31, 2017 and each May 31 thereafter, 3.0 to 1.0 and (D) November 30, 2017 and each November 30 thereafter 2.5 to 1.0;
(iii) at all times, a Liabilities to Tangible Net Worth Ratio, on a Consolidated Basis, of not more than , for each Financial Quarter ending (A) May 31, 2.5 to 1.0 and (B) November 30, 1.7 to 1.0; and
(iv) at all times, a ratio of (x) the result of (I) the liquidation value of the assets subject to the IFC Security over which IFC has the Applicable Priority Security Interest, determined based on the most recently delivered appraisal under Section 5.01(m) minus (II) the outstanding amount of the Rabobank Debt minus (III) the outstanding amount of the Banco Ciudad Debt to (y) the outstanding balance of the Loans, of not less than 1.5 to 1.0;
(o) Cañuelas Pack Financial Covenants. With respect to Cañuelas Pack and its Subsidiaries, maintain at all times, on a Consolidated Basis:
(i) Financial Debt outstanding of not more than $5,000,000; and
(ii) Tangible Net Worth of at least $500,000;
(p) Related-Party Transactions Corporate Policy. Maintain in full force and effect, and comply with, the Related-Party Transactions Corporate Policy; and
(q) Existing Guarantees. Terminate in full the Existing Guarantees set forth on Annex L on the cancellation dates described on Annex L and receive a full and complete release from each relevant beneficiary, on terms satisfactory to IFC.
5.02. Negative Covenants. Unless IFC otherwise agrees in writing, no Obligor shall, nor shall they permit any of their Subsidiaries to:
(a) Restricted Payments. Declare or pay any Restricted Payment, except that:
(i) any Subsidiary of an Obligor may declare and pay Cash Restricted Payments to an Obligor or to any wholly-owned Subsidiary of an Obligor;
(ii) any partially-owned Subsidiary may declare and pay Cash Restricted Payments to its stockholders, provided that any applicable Obligor and its Subsidiaries must receive at least their proportionate share of any Restricted Payments paid by such Subsidiary; and
(iii) so long as the applicable Obligor had Net Income greater than $0.00 for the most recent Calculation Period, such Obligor may declare and pay Cash Restricted Payments if, after giving effect to such Restricted Payment (A) no Potential Event of Default or Event of Default shall be continuing or would result therefrom, (B) the Obligors are in compliance with all financial covenants set forth in Section 5.01(n) and (o) on a Pro Forma Basis, (C) the Prospective Debt Coverage Ratio on such date is not less than 1.4 to 1.0 and (D) such Obligor delivers to IFC a certification substantially in the form of Schedule 8; provided that any such Cash Restricted Payments shall be made entirely out of retained earnings and such retained earnings shall not include any amount resulting from the revaluation of any of the applicable Obligors assets;
(b) Permitted Financial Debt. Incur, assume or permit to exist any Financial Debt except:
(i) the Loan;
(ii) the Financial Debt set forth on Annex D;
(iii) the Existing Guarantees set forth on Annex L;
(iv) intercompany Financial Debt between or among the Obligors and any of their wholly-owned Subsidiaries; provided, however, that:
(A) if an Obligor is the obligor on such Financial Debt, such Financial Debt must be (1) expressly subordinated to the prior payment in full in Cash of all obligations with respect to the Loans and (2) pledged or assigned to IFC as part of the IFC Security, in each case on terms and pursuant to documentation satisfactory to IFC; and
(B) (x) any subsequent issuance or transfer of any equity interest in a wholly-owned Subsidiary thereof that results in any such Financial Debt being held by a Person other than an Obligor or a wholly-owned Subsidiary thereof and (y) any sale or other transfer of any such Financial Debt to a Person that is not either an Obligor or a wholly-owned Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Financial Debt by such Obligor or such Subsidiary, as the case may be, that was not permitted by this clause (iii);
(v) Permitted Refinancing Debt incurred by an Obligor or any of its Subsidiaries in exchange for, or the net proceeds of which are used to refund, refinance or replace, Financial Debt (other than intercompany Financial Debt) otherwise permitted by this Agreement; and
(vi) Financial Debt of an Obligor and its Subsidiaries if, after giving effect to the incurrence thereof, (A) the Obligors are in compliance with all financial covenants set forth in Section 5.01(n) and (o), (B) the Peak Debt Service Coverage Ratio of the Borrower is not less than 1.4 to 1.0 and (C) the Dollar Debt Service to Exports Ratio of the Borrower is not less than 1.0 to 1.0, in each case as certified by the chief financial officer of each Obligor;
(c) Leases. Enter into any agreement or arrangement to lease any property or equipment of any kind (other than Financial Leases), except with respect to which the aggregate lease payments do not exceed the equivalent of $7,000,000 in any Financial Year;
(d) Derivative Transactions. Enter into any Derivative Transaction or assume the obligations of any party to any Derivative Transaction other than in the ordinary course of business, and not for speculative purposes;
(e) Guarantees and Other Obligations. Notwithstanding the provisions of Section 5.02(b), enter into any agreement or arrangement to guarantee or, in any way or under any condition, assume or become obligated for all or any part of any financial or other obligation of another Person, except the Existing Guarantees set forth on Annex L;
(f) Permitted Liens. Create or permit to exist any Lien on any property, revenues or other assets, present or future, of any Obligor or any of its Subsidiaries, except for the following (collectively, Permitted Liens):
(i) the IFC Security;
(ii) Liens in existence on the date hereof which are listed, and the property subject thereto described, in Annex G; provided that (A) such Liens shall not apply to any other property or asset of the Borrower or any Subsidiary and (B) such Liens shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(iii) any Lien arising from any tax, assessment or other governmental charge or other Lien arising by operation of law, in each case if the obligation underlying any such Lien is not yet due or, if due, is being contested in good faith by appropriate proceedings so long as:
(A) those proceedings do not involve any substantial danger of the sale, forfeiture or loss of any material asset(s), title thereto or any interest therein, nor interfere in any material respect with the use or disposition thereof or the implementation of the Transactions or the carrying on of the business or Operations of each Obligor and its Subsidiaries; and
(B) the applicable Obligor has set aside adequate reserves sufficient to promptly pay in full any amounts that such Obligor may be ordered to pay on final determination of any such proceedings;
(iv) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 6.02(o);
(v) Liens over export agreements and/or accounts receivables generated by sales or exports of products or entered into by any Obligor or any of its Subsidiaries in the ordinary course of business, securing pre-export financing facilities provided by lenders or trusts;
(vi) Liens on fixed or capital assets acquired, constructed or improved by any Obligor or any Subsidiary; provided that (A) such security interests secure Financial Debt permitted by Section 5.02(b), (B) such security interests and the Financial Debt secured thereby are incurred prior to or within 30 days after such acquisition or the completion of such construction or improvement, (C) the Financial Debt secured thereby does not exceed the cost or fair market value, whichever is lower, of the fixed or capital assets being acquired, constructed or improved and (D) such security interests shall not apply to any other property or assets of any Obligor or any Subsidiary;
(vii) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing Financial Debt and not materially interfering with the conduct of the business and Operations of any applicable Obligor or any of its Subsidiaries; and
(viii) Liens securing obligations at no time exceeding 20% of the Consolidated fixed assets of the Original Obligors and their Subsidiaries in aggregate principal amount;
(g) Arms Length Transactions. Enter into any transaction except in the ordinary course of business on the basis of arms length arrangements (including, without limitation, transactions whereby an Obligor or a Subsidiary might pay more than the ordinary commercial price for any purchase or might receive less than the full ex-works commercial price (subject to normal trade discounts) for its products;
(h) Purchasing or Sales Agency. Establish any sole and exclusive purchasing or sales agency for a material portion of its purchases or sales;
(i) Profit Sharing Arrangements. Except in the ordinary course of business, consistent with customary market practice, and with non-Affiliates, enter into any partnership, profit-sharing or royalty agreement or other similar arrangement whereby an Obligors income or profits are, or might be, shared with any other Person;
(j) Management Contracts. Enter into any management contract or similar arrangement whereby its business or operations are managed by any other Person;
(k) Permitted Investments. Make or permit to exist loans or advances to, or deposits (except commercial bank deposits in the ordinary course of business) with, other Persons or investments in any Person or enterprise (each of the foregoing are Investment and, collectively, Investments) other than the following:
(i) each Obligor and its Subsidiaries may acquire and hold accounts receivable owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of such Obligor or such Subsidiary;
(ii) each Obligor and its Subsidiaries may acquire and hold Cash and Cash Equivalents;
(iii) each Obligor and its Subsidiaries may hold the Investments held by them on the date hereof and described on Annex C, provided that any additional Investments made with respect thereto shall be permitted only if permitted under the other provisions of this Section 6.02(k);
(iv) each Obligor and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
(v) any Obligor may enter into a Derivative Transaction or assume the obligations of any party to a Derivative Transaction to the extent permitted by Section 5.02(d);
(vi) each Obligor and its Subsidiaries may make intercompany loans and advances to any wholly-owned Subsidiary to the extent permitted by Section 5.02(b)(iv);
(vii) each Obligor and its Subsidiaries may own the equity interests of its respective Subsidiaries created or acquired in accordance with the terms of this Agreement (so long as all amounts invested in such Subsidiaries are independently justified under another provision of this
Section 5.02(k)) so long as if such Subsidiary is a Material Subsidiary, such Subsidiary becomes a party to the Transaction Documents, including the execution and delivery of a Subsidiary Guarantee and such Subsidiary provides other customary documentation requested by IFC;
(viii) the Obligors and their respective Subsidiaries may make Permitted Acquisitions so long as:
(A) no Event of Default or Potential Event of Default shall have occurred at the time of, or after giving effect to, such Permitted Acquisition;
(B) calculations made by the applicable Obligor with respect to all financial covenants for the respective Calculation Period on a Pro Forma Basis show that all financial covenants would have been complied with as if such Permitted Acquisition had occurred on the first day of such Calculation Period;
(C) all representations and warranties contained in the Transaction Documents are true and correct;
(D) the aggregate consideration for all Permitted Acquisitions shall not exceed the equivalent of $10,000,000 for each Financial Year; and
(E) the Borrower shall have given 10 days prior written notice of such Permitted Acquisition, together with a certificate from its chief financial officer containing the relevant calculations and certifying compliance with the foregoing; and
(ix) each Obligor and its Subsidiaries may make advances in the form of a prepayment of expenses to vendors, suppliers and trade creditors, so long as such expenses were incurred in the ordinary course of business of such Obligor or such Subsidiary;
(l) Fundamental Changes. Change (i) its Charter in any manner which would be inconsistent with the provisions of any Transaction Document; or (ii) change its Financial Year;
(m) Amendments, Waivers, Etc. of Material Agreements. Terminate, amend or grant any waiver with respect to any provision of:
(i) any Transaction Document;
(ii) the MOLCA Lease Agreement; or
(iii) any agreement or other instrument evidencing or relating to Financial Debt;
(n) Prepayment of Long-Term Debt. Make any voluntary, optional or mandatory prepayment of or repurchase or reacquire for value any Financial Debt (other than the Loans and prepayments of the Rabobank Debt) pursuant to any provision of any agreement or note with respect to that Financial Debt unless (i) such Financial Debt is refinanced with Permitted Refinancing Debt, or (ii) the applicable Obligor gives IFC at least 30 days advance notice of its intention to make the proposed prepayment and, if IFC so requires, such Obligor contemporaneously prepays a proportion of the Loans equivalent to the proportion of the part of the Financial Debt being prepaid, such prepayment to be made in accordance with the provisions of Section 2.06 (Prepayment) except that there shall be no minimum amount or advance notice period for that prepayment;
(o) Nature of Business. Engage directly or indirectly in any business other than the businesses engaged in by each Obligor and its Subsidiaries as of the date hereof and reasonable extensions thereof and businesses ancillary or complementary thereto; or engage in any business or own any significant assets or have any material liabilities relating to any Prohibited Activity;
(p) Winding Up, Liquidation, Merger or Consolidation. Wind up, liquidate or dissolve its affairs or enter into any partnership, joint venture or transaction of merger or consolidation, except that any Subsidiary of an Obligor may merge or consolidate with and into, or be dissolved or liquidated into, such Obligor or any wholly-owned Subsidiary of such Obligor, so long as (A) such Obligor or such Subsidiary is the surviving or continuing entity of any such merger, consolidation, dissolution or liquidation and (B) any security interests granted to IFC pursuant to the Security Documents in the assets of such Subsidiary shall remain in full force and effect with the Applicable Priority Security Interest (to at least the same extent as in effect immediately prior to such merger, consolidation, dissolution or liquidation) and all actions required to maintain said perfected status have been taken;
(q) Asset Sales. Sell, transfer, lease or otherwise dispose of all or any part of its property or assets (other than sales of inventory in the ordinary course of business), whether in a single transaction or in a series of transactions, related or otherwise, except that:
(i) each Obligor and its Subsidiaries may liquidate or otherwise dispose of obsolete or worn-out property in the ordinary course of business;
(ii) each Obligor and its Subsidiaries may sell assets (other than the capital stock or other equity interests of any Subsidiary if, after giving effect to such sale, the entity would no longer be a Subsidiary), so long as (A) no Event of Default or Potential Event of Default then exists or would result therefrom, (B) each such sale is made on an arms-length basis and such Obligor or the respective Subsidiary receives at least fair market value, as determined in good faith by the board of directors of such Obligor, (C) the consideration received by such Obligor or such Subsidiary consists solely of Cash and is paid at the time of the closing of such sale; provided that the Obligors and their Subsidiaries may only sell or otherwise dispose of assets under this clause (C) in an amount not exceeding $10,000,000 in any Financial Year and (D) such assets are not subject to the lien of the Security Documents;
(iii) each Obligor and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not as part of any financing transaction;
(iv) each Obligor and its Subsidiaries may grant licenses, sublicenses, leases or subleases to other Persons not materially interfering with the conduct of the business of such Obligor or any of its Subsidiaries, in each case so long as no such grant otherwise affects IFCs security interest in the asset or property subject thereto;
(v) each Obligor or any Subsidiary may convey, sell or otherwise transfer all or any part of its business, properties and assets to an Obligor or to any wholly-owned Subsidiary of an Obligor, so long as any security interests granted to IFC pursuant to the Security Documents in the assets so transferred shall remain in full force and effect with the Applicable Priority Security Interest (to at least the same extent as in effect immediately prior to such transfer) and all actions required to maintain said perfected status have been taken; and
(vi) each Obligor and its Subsidiaries may liquidate or otherwise dispose of Cash Equivalents in the ordinary course of business, in each case for Cash at fair market value;
(r) Asset Purchases. Purchase or otherwise acquire (in 1 or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person, except that:
(i) expenditures for fixed or other non-current assets by an Obligor and its Subsidiaries shall be permitted; and
(ii) Investments may be made to the extent permitted by Section 5.02(k);
(s) Use of Proceeds. Use the proceeds of any Loan in the territories of any country that is not a member of the World Bank or for reimbursements of expenditures in those territories or for goods produced in or services supplied from any such country;
(t) Amendment of Action Plan. Amend the Action Plan in any material respect;
(u) Distributions from Subsidiaries. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of an Obligor to (a) pay dividends or make any other distributions on its capital stock or any other equity interest or participation in its profits owned by such Obligor or any of its Subsidiaries, or to pay any Financial Debt owed to such Obligor or any of its Subsidiaries, (b) make loans or advances to such Obligor or any of its Subsidiaries or (c) transfer any of its properties or assets to such Obligor or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) the Transaction Documents, (iii) customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any of such Obligors Subsidiaries, (v) customary provisions restricting assignment of any licensing agreement (in which any of such Obligors Subsidiaries is the licensee) or other contract entered into by any of such Obligors Subsidiaries in the ordinary course of business, (vi) restrictions on the transfer of any asset pending the closing of the sale of such asset, and (vii) restrictions on the transfer of any asset subject to a Permitted Lien;
(v) UN Security Council Resolutions. Enter into any transaction or engage in any activity prohibited by any resolution of the United Nations Security Council under Chapter VII of the United Nations Charter;
(w) Sanctionable Practices. Engage in (and no Obligor or any Subsidiary thereof shall authorize or permit any Affiliate or any other Person acting on its behalf to engage in) with respect to its Operations or any transaction contemplated by this Agreement, any Sanctionable Practices. Each Obligor further covenants that should IFC notify such Obligor of its concerns that there has been a violation of the provisions of this Section or of Section 3.01(u) of this Agreement, it shall cooperate and it shall cause each relevant Subsidiary to cooperate, in good faith with IFC and its representatives in determining whether such a violation has occurred, and shall respond promptly and in reasonable detail to any notice from IFC, and shall furnish documentary support for such response upon IFCs request;
(x) Participants Sanctions Regimes. Commit any act which could cause a Participant to violate any sanctions regime to which it is subject; or
(y) Negative Pledge. Create, incur, assume or permit to exist any Lien on the Borrowers existing trademarks/tradenames (being at the time of this Agreement, Pureza, Cañuelas Harinas, Mama
Cocina, 9 de Oro, Paseo, Cukis, San Agustin) or any future trademarks/tradenames owned by any Obligor or any Subsidiary thereof.
5.03. Reporting Requirements. Unless IFC otherwise agrees, each Original Obligor, as applicable shall:
(a) Quarterly Financial Statements and Reports. As soon as available but in any event within 45 days after the end of each quarter of each Financial Year, deliver to IFC:
(i) 2 copies of such Original Obligors and each of its Subsidiaries complete financial statements (including consolidating financial statements with respect to its Subsidiaries) for such quarter prepared, on both a Consolidated Basis and an un-Consolidated Basis, in accordance with the Accounting Standards and on a basis consistent with such Original Obligors audited financial statements, in each case, certified by such Original Obligors chief financial officer;
(ii) a report by such Original Obligor on its operations during that quarter, in form and substance satisfactory to IFC; and
(iii) a report (in a form pre-agreed by IFC), signed by such Original Obligors chief executive officer and chief financial officer, concerning compliance with the financial covenants in this Agreement (using the methodology of calculation in respect of such covenants set forth in Annex H);
(b) Annual Financial Statements and Reports. As soon as available but in any event within 90 days after the end of each Financial Year, deliver to IFC:
(i) 2 copies of its and each of its Subsidiaries complete and audited financial statements (including consolidating financial statements with respect to its Subsidiaries) for that Financial Year (which are in agreement with its books of account and prepared, on both a Consolidated Basis and an unconsolidated basis, in accordance with the Accounting Standards, together with an unqualified audit report on them from the Auditors to the effect that such financial statements present fairly the financial condition and results of operations of such Obligor and its Subsidiaries, all in form satisfactory to IFC;
(ii) a management letter and such other communication from the Auditors commenting, with respect to that Financial Year, on, among other things, the adequacy of such Original Obligors financial control procedures, accounting systems and management information system;
(iii) a report by such Original Obligor on its operations during that Financial Year, in form and substance satisfactory to IFC; and
(iv) a report (in a form pre-agreed by IFC), signed by such Original Obligors chief executive officer and chief financial officer, concerning compliance with the financial covenants in this Agreement (using the methodology of calculation in respect of such covenants set forth in Annex H);
(v) a statement by such Original Obligor of all transactions between such Original Obligor and/or its Subsidiaries and each of their respective Affiliates, if any, during that Financial
Year, and a certification by such Original Obligors and/or its Subsidiaries chief financial officer that those transactions were on the basis of arms-length arrangements;
(c) Management Letters. Deliver to IFC, promptly following receipt, a copy of any management letter or other communication sent by the Auditors (or any other accountants retained by such Original Obligor) to such Original Obligor or its management in relation to such Original Obligors financial, accounting and other systems, management or accounts, if not provided pursuant to Section 5.03(b)(ii);
(d) Annual Monitoring Report. Within 90 days after the end of each Financial Year, deliver to IFC the Annual Monitoring Report (i) confirming compliance by such Original Obligor and/or the relevant Subsidiary with the Action Plan, the social and environmental covenants set forth in Sections 5.01 and 5.02 and Applicable S&E Law or, as the case may be, identifying any non-compliance or failure, and the actions being taken to remedy any such deficiency; and (ii) including such information as IFC shall reasonably require in order to measure the ongoing development results of the relevant Operations of such Original Obligor and any Subsidiary against the indicators specified in Annex M hereto (and which information IFC may hold and use in accordance with IFCs Access to Information Policy) (dated January 1, 2012), the link of which is http://ifcnet.ifc.org/intranet/ifcpolproc.nsf/AttachmentsByTitle/ 700101 IFCPolicyDisclosureInformation_Effective+Jan+1 +2012/SFILE/700101 IFCPolicyDisclosurelnfor mation.pdf;
(e) Notice of Accidents, Etc. Within 3 days after its occurrence, notify IFC of any social, labor, health and safety, security or environmental incident, accident or circumstance having, or which could reasonably be expected to have, a Material Adverse Effect or material adverse impact on the implementation of the Transactions or on carrying on of Operations by such Original Obligor and/or any Subsidiary in accordance with the Performance Standards, specifying in each case the nature of the incident, accident, or circumstance and any effect resulting or likely to result therefrom, and the measures such Original Obligor and/or the relevant Subsidiary is taking or plans to take to address them and to prevent any future similar event; and keep IFC informed of the on-going implementation of those measures and plans;
(f) Shareholder Matters. Give notice to IFC, concurrently with such Original Obligor s notification to its shareholders, of any meeting of its shareholders, such notice to include the agenda of the meeting; and, as soon as available, deliver to IFC 2 copies of:
(i) all notices, reports and other communications of such Original Obligor to its shareholders, whether any such communication has been made on an individual basis or by way of publication in a newspaper or other communication medium; and
(ii) the minutes of all shareholders meetings;
(g) Changes to Business; Material Adverse Effect. Promptly notify IFC of any proposed change in the business or operations of any Obligor or any of its Subsidiaries and of any event or condition that has had or could reasonably be expected to have a Material Adverse Effect;
(h) Litigation, Etc. Promptly upon becoming aware of any litigation, arbitration or administrative proceedings before any Authority or arbitral body which has had or, if determined adversely, could reasonably be expected to have, a Material Adverse Effect, notify IFC by facsimile of that event specifying the nature of that litigation or those proceedings and the steps the applicable Obligor and/or the relevant Subsidiary is taking or proposes to take with respect thereto;
(i) Default. Promptly upon the occurrence of an Event of Default or Potential Event of Default, notify IFC by facsimile specifying the nature of that Event of Default or Potential Event of Default and any steps the Obligors are taking to remedy it;
(j) Insurance. Provide to IFC, in a timely manner, the insurance policies and certificates and other information referred to in Section 5.04(d) (Insurance); and
(k) Other Information. Promptly provide to IFC such other information as IFC from time to time requests about each Obligor, any of its Subsidiaries, their respective assets and Operations and the Transactions, including without limitation information that IFC requests on behalf of the Participants for the Participants to satisfy requirements under applicable laws and regulations, including those concerning anti-money laundering and combating the financing of terrorism (AML/CFT).
5.04. Insurance.
(a) Insurance Requirements and Obligors Undertakings. Unless IFC otherwise agrees, each Obligor shall, and shall cause its Subsidiaries to:
(i) insure and keep insured, with financially sound and reputable insurers, its assets and business against insurable losses, including the insurances specified in Annex F;
(ii) promptly notify the relevant insurer of any claim under any policy written by that insurer and diligently pursue that claim;
(iii) comply with all warranties and conditions under each insurance policy;
(iv) not do or omit to do, or permit to be done or not done, anything which might prejudice such Obligors, or, where IFC is a loss payee or an additional named insured, IFCs right to claim or recover under any insurance policy; and
(v) not vary, rescind, terminate, cancel or cause a material change to any insurance policy required in Annex F (to the extent such variation, termination, cancelation or change would result in a reduction in coverage);
provided always that if at any time and for any reason any insurance required to be maintained under this Agreement shall not be in full force and effect, then IFC shall thereupon or at any time while the same is continuing be entitled (but have no obligation) on its own behalf to procure that insurance at the expense of the Borrower and to take all such steps to minimize hazard as IFC may consider expedient or necessary.
(b) Policy Provisions. Each insurance policy required in Annex F shall be on terms and conditions acceptable to IFC, and shall contain provisions to the effect that:
(i) no policy can be terminated, canceled or suspended by any Obligor or the insurer for any reason unless IFC and, in the case of termination or if cancellation or suspension is initiated by the insurer, such Obligor received at least 45 days notice (or such lesser period as IFC may agree) prior to the effective date of such termination, cancellation or suspension;
(ii) IFC is named as additional named insured on all liability insurance required in Annex C, other than section 3 of Annex F; and
(iii) contractors working at the applicable project site during any construction works are named as additional named insured on liability insurance required in Annex C; and
(iv) on every insurance policy on the Borrowers assets which are the subject of the IFC Security and for business interruption/increased cost of working, IFC is named as loss payee for any claim, or any series of claims arising with respect to the same event, whose aggregate amount is the equivalent of $2,000,000 or more.
(c) Application of Proceeds.
(i) At its discretion, IFC may remit the proceeds of any insurance paid to it to the applicable Obligor to repair or replace the relevant damaged assets or may apply those proceeds towards any amount payable to IFC under this Agreement, including to repay or prepay all or any part of the Loans in accordance with Section 2.06 (Prepayment); provided that there shall be no minimum amount or notice period or prepayment premium for any such prepayment.
(ii) The Borrower shall use any insurance proceeds it receives (whether from IFC or directly from the insurers) for loss of or damage to any asset solely to replace or repair that asset.
(d) Reporting Requirements. Unless IFC otherwise agrees, the Obligors shall provide to IFC the following:
(i) as soon as possible after its occurrence, notice of any event which entitles the Borrower to claim for an aggregate amount exceeding the equivalent of $1,000,000 under any 1 or more insurance policies;
(ii) within 30 days of renewal of an insurance policy required in Annex F (other than those in section 3 of such Annex), a copy of that policy; and
(iii) any other insurance-related information or documents as IFC requests from time to time.
Notwithstanding anything in this Section 5.04 to the contrary, the Borrower shall have 60 days after taking possession of any flour mills to procure the insurance required by this Section 5.04 and provide evidence thereof to IFC.
ARTICLE VI
Events of Default
6.01. Acceleration after Default. If any Event of Default occurs and is continuing (whether it is voluntary or involuntary, or results from operation of law or otherwise), IFC may, by notice to the Borrower, require the Borrower to repay the Loans or such part of the Loans as is specified in that notice. On receipt of any such notice, the Borrower shall immediately repay the Loans (or that part of the Loans specified in that notice) and pay all interest accrued on it, the prepayment premium specified in Section 2.06 on the amount of the Loans whose payment is accelerated and any other amounts then payable under this Agreement and the other Transaction Documents. The Borrower waives any right it might have to further notice, presentment, demand or protest with respect to that demand for immediate payment.
6.02. Events of Default. It shall be an Event of Default if:
(a) Failure to Pay Principal or Interest. The Borrower fails to pay when due any part of the principal of, or interest on, the Loans and such failure continues for a period of 5 days;
(b) Failure to Pay Other IFC Loans. The Borrower or any of its Affiliates fails to pay when due any part of the principal of, or interest on, any loan from IFC other than the Loans and any such failure continues for the relevant period of grace provided for in the agreement providing for that loan;
(c) Failure to Comply with Obligations. Any Obligor fails to comply with any of its obligations under this Agreement or any other Transaction Document to which it is a party or any other agreement between such Person and IFC (other than those referred to in clauses (a) or (b) of this Section 6.02), and any such failure continues for a period of 30 days after the date of that failure;
(d) Failure by Other Parties to Comply with Obligations. Any party to a Transaction Document fails to observe or perform any of its obligations under that Transaction Document (other than those referred to in clauses (a), (b) or (c) of this Section 6.02), and any such failure continues for a period of 30 days after the date of that failure;
(e) Misrepresentation. Any representation or warranty made in (i) Article III or in connection with the execution of, or any request (including a request for Additional Disbursement) under, this Agreement or (ii) any other Transaction Document is incorrect in any material respect;
(f) Expropriation, Nationalization, Etc. Any Authority condemns, nationalizes, seizes, or otherwise expropriates all or any substantial part of the property or other assets of any Obligor, or any of their respective Subsidiaries or of any of their respective capital stock, or assumes custody or control of that property or other assets or of the business or operations of any Obligor or any of their respective Subsidiaries or of any of their respective capital stock, or takes any action for the dissolution or disestablishment of any Obligor nor any of their respective Subsidiaries or any action that would prevent any Obligor nor any of their respective Subsidiaries or their respective officers from carrying on all or a substantial part of their respective business or Operations;
(g) Involuntary Proceedings. A decree or order by a court is entered against any Obligor or any of their respective Subsidiaries:
(i) adjudging an Obligor or any of its Subsidiaries bankrupt or insolvent;
(ii) approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of, or with respect to, an Obligor or any of its Subsidiaries under any applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of an Obligor or any of its Subsidiaries or of any substantial part of any of their respective property or other assets; or
(iv) ordering the winding up or liquidation of its affairs;
or any petition is filed seeking any of the above and is not dismissed within 30 days;
(h) Voluntary Proceedings. Any Obligor or any of their respective Subsidiaries:
(i) requests a moratorium or suspension of payment of Liabilities from any court;
(ii) institutes proceedings or takes any form of corporate action to be liquidated, adjudicated bankrupt or insolvent;
(iii) consents to the institution of bankruptcy or insolvency proceedings against it;
(iv) files a petition or answer or consent seeking reorganization or relief under any applicable law, or consents to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Obligor or any of its or of any substantial part of any of their respective property;
(v) makes a general assignment for the benefit of creditors; or
(vi) admits in writing its inability to pay its Liabilities generally as they become due or otherwise becomes insolvent;
(i) Attachment. An attachment or analogous process is levied or enforced upon or issued against any of the assets of any Obligor or any of their respective Subsidiaries for an amount in excess of the equivalent of $5,000,000 and is not discharged within 30 days;
(j) Analogous Events to Bankruptcy. Any other event occurs which under any applicable law would have an effect analogous to any of those events listed in Section 6.02(f) through Section 6.02(h);
(k) Cross-Default. Any Obligor or any of their respective Subsidiaries fails to pay any of its Liabilities (other than the Loans or any other loan from IFC to any Obligor or any of its Subsidiaries) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the $5,000,000 or to perform any of its obligations under any agreement pursuant to which there is outstanding any such Liabilities, and any such failure continues for more than any applicable period of grace or any such Liabilities become prematurely due and payable or are placed on demand;
(1) Failure to Maintain Authorizations. Any Authorization necessary for any Obligor or any of their respective Subsidiaries to perform and observe its obligations under any Transaction Document, or to carry out the Transactions or its Operations, is not obtained when required or is rescinded, terminated, lapses or otherwise ceases to be in full force and effect, including with respect to the remittance to IFC or its assignees, in the Loan Currency, of any amounts payable under any Transaction Document, and is not restored or reinstated within 30 days of notice by IFC to the Obligors requiring that restoration or reinstatement;
(m) Revocation, Etc. of Security Documents. Any Security Document or any of its provisions:
(i) is revoked, terminated or ceases to be in full force and effect or ceases to provide the security intended, without, in each case, the prior consent of IFC;
(ii) becomes unlawful or is declared void; or
(iii) is repudiated or its validity or enforceability is challenged by any Person and any such repudiation or challenge continues for a period of 30 days during which period such repudiation or challenge has no effect;
(n) Revocation Etc. of Transaction Documents. Any Transaction Document (other than a Security Document) or any of its provisions:
(i) is revoked, terminated or ceases to be in full force and effect without, in each case, the prior consent of IFC, and that event, if capable of being remedied, is not remedied to the satisfaction of IFC within 30 days of IFCs notice to the Borrower; or
(ii) becomes unlawful or is declared void; or
(iii) is repudiated or the validity or enforceability of any of its provisions at any time is challenged by any Person and such repudiation or challenge is not withdrawn within 30 days of IFCs notice to the Borrower requiring that withdrawal; provided that no such notice shall be required or, as the case may be, the notice period shall terminate if and when such repudiation or challenge becomes effective;
(o) Judgments. A final, non-appealable judgment, order or arbitral award for the payment of money in excess of the equivalent of $5,000,000 is rendered against any Obligor or any of their respective Subsidiaries or any of their respective properties and that judgment, order or arbitral award continues to be unsatisfied for a period of 30 consecutive days;
(p) Non-Performance of Other Agreements. The MOLCA Lease Agreement:
(i) is breached by any party thereto and such breach has or could reasonably be expected to have a Material Adverse Effect; or
(ii) is revoked, terminated or ceases to be in full force and effect without the prior consent of IFC, or performance of any of the material obligations under any such agreement becomes unlawful or any such agreement is declared to be void or is repudiated or its validity or enforceability at any time is challenged by any party thereto; or
(q) Change of Control. A Change of Control shall have occurred.
6.03. Bankruptcy. If either Original Obligor is liquidated or declared bankrupt, the Loan, all interest accrued on it and any other amounts payable under this Agreement will become immediately due and payable without any presentment, demand, protest or notice of any kind, all of which each Original Obligor waives.
ARTICLE VII
GUARANTEE
7.01. Guarantee.
(a) Cañuelas Pack irrevocably, absolutely and unconditionally, jointly and not severally: (i) guarantees, as a primary obligor and not merely as surety, to IFC the punctual and complete payment when due and payable (whether at stated maturity or upon prepayment, acceleration or otherwise) of the
Guaranteed Obligations; and (ii) undertakes with IFC that whenever the Borrower does not pay any amount of the Guaranteed Obligations when so due Cañuelas Pack will immediately, and in any event forthwith upon demand by IFC, pay that amount to IFC, in Dollars, and otherwise in the same manner in all respects as the Guaranteed Obligations are required to be paid by the Borrower.
(b) The obligation of Cañuelas Pack under this Article VII is a continuing obligation of Cañuelas Pack (and all Guaranteed Obligations are, or when created will be, conclusively presumed to have been created in reliance on this Agreement) and will remain in full force and effect until the day on which: (i) the Loans have been fully disbursed or any undisbursed portion thereof has been cancelled; and (ii) all Guaranteed Obligations have been paid in full (such day, the Termination Date).
(c) This guarantee is a guarantee of payment and not of collection and constitutes an additional, separate and independent obligation of Cañuelas Pack which will survive the termination of this Agreement, any other Transaction Document and any other agreement or instrument pursuant to which any Guaranteed Obligation is or may become outstanding.
(d) Cañuelas Packs obligations under this Agreement can be discharged only by performance and then only to the extent of such performance.
7.02. No Set-off. All payments which Cañuelas Pack is required to make under this Agreement shall be made without any set-off, counterclaim or condition.
7.03. Certificate Conclusive. A certificate of IFC stating:
(a) the amount of the Guaranteed Obligations (whether currently due and payable or not); or
(b) any amount due and payable by Cañuelas Pack under this Agreement;
when delivered will be conclusive in the absence of manifest error.
7.04. Application of Payments. IFC may apply any monies received by it or recovered under:
(a) any IFC Security; and
(b) any other document or agreement which is a security for any of the Guaranteed Obligations,
in such manner as it determines in its absolute discretion.
7.05. Allocation. If Cañuelas Pack at any time pays to IFC an amount less than the full amount then due and payable to IFC under this Agreement, IFC may allocate and apply such payment in any way or manner and for such purpose or purposes as IFC in its sole discretion determines, notwithstanding any instruction that Cañuelas Pack, the Borrower or any other Person may give to the contrary.
7.06. Waiver of Defenses. Cañuelas Packs obligations under this Article VII will not be affected or impaired by any act, omission, circumstance (other than complete payment of the Guaranteed Obligations), matter or thing which, but for this Section or any of the other provisions in this Article VII, would reduce, release or prejudice any of its obligations under this Agreement or which might otherwise constitute a legal or equitable discharge or defense of Cañuelas Pack under any applicable law.
7.07. Waiver of Notices, Claims and Prior Action. Cañuelas Pack hereby waives to the fullest extent permitted by any applicable law:
(a) notice of acceptance of the Guarantee;
(b) notice of the creation, extension or accrual of any of the Guaranteed Obligations;
(c) notice of presentment, demand, dishonor, non-payment, protest, or other default with respect to any of the Guaranteed Obligations;
(d) notice of any other nature whatsoever to any Person (including Cañuelas Pack and any other guarantor);
(e) any requirement that IFC take any action whatsoever against the Borrower or any other Person (including Cañuelas Pack or any other guarantor) or file any claim in the event of the bankruptcy of the Borrower, Cañuelas Pack or any other Person; and
(f) any claims based on IFCs failure to protect, perfect, preserve, or resort to the IFC Security or any other collateral securing the Guaranteed Obligations.
7.08. Consent. Cañuelas Pack hereby irrevocably consents that from time to time, and without further notice to or consent of Cañuelas Pack, IFC may take any or all of the following actions without affecting or impairing the Guarantee or Cañuelas Packs obligations under this Agreement:
(a) extend, renew, modify, amend, compromise, settle or release the Guaranteed Obligations, or agree to any composition, forbearance or concession in respect thereof;
(b) release or compromise any liability of any Person or Persons with respect to the Guaranteed Obligations;
(c) release the IFC Security or exchange, surrender, realize upon or otherwise deal with the IFC Security as IFC may determine in its sole discretion;
(d) exercise or refrain from exercising any of its rights or remedies under this Agreement, any other Transaction Document or under law or equity; and
(e) act or fail to act in any manner which may deprive Cañuelas Pack of its right to subrogation against the Borrower or its right to contribution against any co-guarantor.
7.09. Absolute Guarantee. This Guarantee is absolute and unconditional and will not be affected or impaired by:
(a) any failure of the Borrower or Cañuelas Pack to comply with any requirement of any law, regulation or order;
(b) the dissolution, liquidation, reorganization or other alteration of the legal status or structure of the Borrower or Cañuelas Pack;
(c) any purported or actual assignment of the Loans or any part thereof by IFC to any other Person;
(d) this Agreement, any other Transaction Document or any of the Guaranteed Obligations being in whole or in part illegal, void, voidable, avoided, invalid, unenforceable or otherwise of limited force and effect; or
(e) any other circumstance or occurrence whatsoever that might otherwise constitute a defense available to, or discharge of, Cañuelas Pack or any other guarantor or surety.
7.10. Additional Security. This Guarantee is in addition to and is and will not be in any way prejudiced by any collateral or other security now or in the future held by IFC, nor is nor will any such collateral or other security held by IFC or the liability of any Person for all or any part of the Guaranteed Obligations be in any manner prejudiced or affected by this Article VII.
7.11. Non-Competition.
(a) Until the Termination Date, Cañuelas Pack shall not in respect of any amounts that have become payable or have been paid by Cañuelas Pack under this Agreement, seek to enforce repayment or contribution, obtain the benefit of any security or exercise any other rights or legal remedies of any kind which may accrue to Cañuelas Pack against the Borrower, whether by way of subrogation, offset, counterclaim or otherwise, in respect of the amount so payable or so paid.
(b) Cañuelas Pack shall hold in trust for, and forthwith pay or transfer to, IFC any payment or distribution or benefit of security received by it contrary to subsection (a) above.
(c) Upon the Termination Date: (i) Cañuelas Pack, if it has made any payment under this Agreement, will be entitled to exercise its rights of subrogation to its proportion of all relevant rights of IFC against the Borrower pursuant to this Agreement and the other Transaction Documents; and (ii) IFC shall, if requested by Cañuelas Pack and at the expense of Cañuelas Pack, execute and deliver to Cañuelas Pack appropriate documents, without recourse and without representation and warranty, necessary to evidence the transfer by subrogation to Cañuelas Pack of such interest in the Guaranteed Obligations as may result from any payment under this Agreement.
7.12. Bankruptcy or Liquidation of Borrower. If the Borrower is adjudged bankrupt or insolvent, or a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower, or any substantial part of its property or other assets, is appointed, or the Borrower makes any arrangement with its creditors, or is liquidated or wound up, Cañuelas Pack shall not claim, rank, prove or vote as a creditor of the Borrower or its estate in competition with IFC in respect of any amounts owing to Cañuelas Pack by the Borrower on any account whatsoever, but instead shall give IFC the benefit of any such proof and of all amounts to be received in respect of that proof until all Guaranteed Obligations have been fully paid.
7.13. Appropriation and Application of Monies. Until the Termination Date, IFC (or any trustee, agent or other Person acting on its behalf) may:
(a) refrain from applying or enforcing any other monies, security or rights held or received by IFC (or such trustee, agent or other Person) in respect of the Guaranteed Obligations, or apply and enforce the same in such manner and order as it determines in its absolute discretion (whether against the Guaranteed Obligations or otherwise) and Cañuelas Pack shall not be entitled to the benefit of the same; and
(b) hold and keep for such time as it thinks prudent any monies received, recovered or realized under this Agreement, to the credit either of Cañuelas Pack or such other Person or Persons as it determines in its sole discretion or in a suspense account.
7.14. Reinstatement.
(a) The Guarantee under this Article VII will be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or Cañuelas Pack in respect of the Guaranteed Obligations is avoided, rescinded or must otherwise be restored or returned by any recipient thereof, whether as a result of any proceedings in bankruptcy or reorganization, insolvency, dissolution, receivership, liquidation, arrangement, composition or assignment for the benefit of creditors of the Borrower, Cañuelas Pack or any other Person, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower, Cañuelas Pack or any substantial part of their respective property, or otherwise, all as though such payment had not been made.
(b) IFC (or any trustee, agent or other Person acting on its behalf) may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration, and any such action will not preclude reinstatement pursuant to subsection (a) above.
7.15. Limitation. Wherever possible, each provision of this Article VII will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Article VII is prohibited by or invalid under such law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Article VII. Consistent with the foregoing, and notwithstanding any other provision of this Article VII to the contrary, in the event that any action or proceeding is brought in whatever form and in whatever forum seeking to invalidate Cañuelas Packs obligations hereunder under any fraudulent conveyance, fraudulent transfer theory, or similar avoidance theory, whether under state or federal law, Cañuelas Pack, automatically and without any further action being required of Cañuelas Pack or IFC, shall be liable hereunder only for an amount equal to the maximum amount of liability that could have been incurred under applicable law by Cañuelas Pack under any guaranty of the Guaranteed Obligations (or any portion thereof) at the time of the execution and delivery of this Agreement (or, if such date is determined not to be the appropriate date for determining the enforceability of Cañuelas Packs obligations hereunder for fraudulent conveyance or transfer (or similar avoidance) purposes, on the date determined to be so appropriate) without rendering such a hypothetical guaranty voidable under applicable law relating to fraudulent conveyance, fraudulent transfer, or any other grounds for avoidance (such highest amount determined hereunder being Cañuelas Pack s Maximum Guaranty Amount), and not for any greater amount, as if the stated amount hereunder as to Cañuelas Pack had instead been the Maximum Guaranty Amount. This paragraph is intended solely to preserve the rights of IFC hereunder to the maximum extent not subject to avoidance under applicable Law, and neither Cañuelas Pack nor any other Person shall have any right or claim under this paragraph with respect to the limitation described hereunder, except to the extent necessary so that the obligations of Cañuelas Pack under hereunder shall not be rendered voidable under applicable Law.
ARTICLE VIII
Miscellaneous
8.01. Savins of Rights. (a) The rights and remedies of IFC in relation to any misrepresentation or breach of warranty on the part of any Obligor or any other Person shall not be prejudiced by any investigation by or on behalf of IFC or any of the Participants into the affairs of any Obligor or any other Person, by the execution or the performance of this Agreement, any other Transaction Document or the
Participation Agreement or by any other act or thing which may be done by or on behalf of IFC in connection with this Agreement, any other Transaction Document or the Participation Agreement and which might prejudice such rights or remedies.
(b) No course of dealing or waiver by IFC in connection with any condition of Additional Disbursement of the Loans under this Agreement or any other Transaction Document shall impair any right, power or remedy of IFC with respect to any other condition of Additional Disbursement, or be construed to be a waiver thereof; nor shall the action of IFC with respect to any Additional Disbursement affect or impair any right, power or remedy of IFC with respect to any other Additional Disbursement.
(c) Unless otherwise notified to the Borrower by IFC and without prejudice to the generality of Section 8.01(b), the right of IFC to require compliance with any condition under this Agreement or any other Transaction Document that may be waived by IFC with respect to any Additional Disbursement is expressly preserved for the purposes of any subsequent Additional Disbursement.
(d) No course of dealing and no failure or delay by IFC in exercising, in whole or in part, any power, remedy, discretion, authority or other right under this Agreement, any other Transaction Document or any other agreement shall waive or impair, or be construed to be a waiver of, such or any other power, remedy, discretion, authority or right under this Agreement or any other Transaction Document, or in any manner preclude its additional or future exercise; nor shall the action of IFC with respect to any default, or any acquiescence by it therein, affect or impair any right, power or remedy of IFC with respect to any other default.
8.02. Notices. Any notice, request or other communication to be given or made under this Agreement shall be in writing. Subject to Section 5.03(i) and Section 5.03(h) (Reporting Requirements) and Section 8.05 (Applicable Law and Jurisdiction), any such communication may be delivered by hand, airmail, facsimile or established courier service to the partys address specified below or at such other address as such party notifies to the other party from time to time, and will be effective upon receipt.
For the Borrower:
Molino Cañuelas S.A.C.I.F.I.A.
Kennedy 160
Cañuelas
Province of Buenos Aires
Argentina
For Cañuelas Pack
Cañuelas Pack S.A.
Carlos Pellegrini y Ruta 3
(A-814BKD) Cañuelas
Buenos Aires Province
Argentina
For IFC:
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Martin C. Spicer
Regional Head of Industry
With a copy (in the case of communications relating to payments) sent to the attention of the Director, Department of Financial Operations, at:
Facsimile: 202-522-3064.
With an electronic copy (in the case of all reports and notices to be given under Section 5.03 (Reporting Requirements)) sent to the attention of the Manager, B Loan Management Unit, at:
syndicatedloanreports@ifc.org.
8.03. English Language. (a) All documents to be provided or communications to be given or made under this Agreement or any other Transaction Document shall be in the English language.
(b) To the extent that the original version of any document to be provided, or communication to be given or made, to IFC under this Agreement or any other Transaction Document is in a language other than English, that document or communication shall be accompanied by an English translation certified by an Authorized Representative to be a true and correct translation of the original. IFC may, if it so requires, obtain an English translation of any document or communication received in a language other than English at the cost and expense of the Obligors. IFC may deem any such English translation to be the governing version between the Obligors and IFC.
8.04. Term of Agreement. This Agreement shall continue in force until all monies payable under it have been fully paid in accordance with its provisions.
8.05. Applicable Law and Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America.
(b) For the exclusive benefit of IFC, each Obligor irrevocably agrees to venue being laid in the courts of the United States of America located in the Southern District of New York or in the courts of the State of New York located in the Borough of Manhattan, in any legal action, suit or proceeding arising out of or relating to this Agreement, and waives any objections to venue based on grounds of forum non conveniens or inconvenient forum.
(c) For the exclusive benefit of IFC, each Obligor irrevocably also submits to Personal jurisdiction of any such court in any such action, suit or proceeding. Final judgment against such Obligor in any such action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction, including the Country, by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or in any other manner provided by law.
(d) The parties acknowledge and agree that no provision of this Agreement in any way constitutes or implies a waiver, termination or modification by IFC of any privilege, immunity or exemption of IFC granted in the Articles of Agreement establishing IFC, international conventions, or applicable law.
(e) Each Obligor hereby irrevocably designates, appoints and empowers National Corporate Research Ltd, with offices currently located at 10 East 40th St., 10th floor, New York, NY 10016, as its authorized agent solely to receive for and on its behalf service of any summons, complaint or other legal process in any action, suit or proceeding IFC may bring in the State of New York in respect of this Agreement.
(f) As long as this Agreement remains in force, each Obligor shall maintain a duly appointed and authorized agent to receive for and on its behalf service of any summons, complaint or other legal process in any action, suit or proceeding IFC may bring in New York, New York, United States of America, with respect to this Agreement. The Obligors shall keep IFC advised of the identity and location of such agent.
(g) The Obligors also irrevocably consent, if for any reason its authorized agent for service of process of summons, complaint and other legal process in any action, suit or proceeding is not present in New York, New York, to the service of such papers being made out of the courts of the United States of America located in the Southern District of New York and the courts of the State of New York located in the Borough of Manhattan by mailing copies of the papers by registered United States air mail, postage prepaid, to such Obligor, at its address specified pursuant to Section 8.02 (Notices). In such a case, IFC shall also send by facsimile, or have sent by facsimile, a copy of the papers to each Obligor.
(h) Service in the manner provided in Sections 8.05 (e),(f) and (g) in any action, suit or proceeding will be deemed Personal service, will be accepted by the applicable Obligor as such and will be valid and binding upon the Obligors for all purposes of any such action, suit or proceeding.
(i) Each Obligor irrevocably waives to the fullest extent permitted by applicable law:
(i) its right of removal of any matter commenced by IFC in the courts of the State of New York to any court of the United States of America; and
(ii) any and all rights to demand a trial by jury in any such action, suit or proceeding brought against such party by IFC.
(j) To the extent that any Obligor may be entitled in any jurisdiction to claim for itself or its assets immunity in respect of its obligations under this Agreement or any other Transaction Document to which it is a party, from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process or to the extent that in any jurisdiction that immunity (whether or not claimed) may be attributed to it or its assets, each Obligor irrevocably agrees not to claim and irrevocably waives such immunity to the fullest extent permitted now or in the future by the laws of such jurisdiction.
(k) The Obligors hereby acknowledge that IFC shall be entitled under applicable law, including the provisions of the International Organizations Immunities Act, to immunity from a trial by jury in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby brought against IFC in any court of the United States of America. The Obligors hereby waive any and all rights to demand a trial by jury in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated by this Agreement, brought against IFC in any forum in which IFC is not entitled to immunity from a trial by jury.
(l) To the extent that any Obligor may, in any action, suit or proceeding brought in any of the courts referred to in Section 8.05(b) or a court of the Country or elsewhere arising out of or in
connection with this Agreement or any other Transaction Document to which such Obligor is a party, be entitled to the benefit of any provision of law requiring IFC in such action, suit or proceeding to post security for the costs of such Obligor, or to post a bond or to take similar action, such Obligor hereby irrevocably waives such benefit, in each case to the fullest extent now or in the future permitted under the laws of the Country or, as the case may be, the jurisdiction in which such court is located.
(m) Nothing in this Agreement shall affect the right of IFC to commence legal proceedings or otherwise sue any Obligor in the Country or any other appropriate jurisdiction, or concurrently in more than 1 jurisdiction, or to serve process, pleadings and other legal papers upon any Obligor in any manner authorized by the laws of any such jurisdiction.
8.06. Disclosure of Information. (a) IFC may disclose any documents or records of, or information about, this Agreement or any other Transaction Document, or the assets, business, Operations or affairs of the Obligors to:
(i) its outside counsel, auditors and rating agencies,
(ii) any Person with a participation in or who intends to purchase a participation in a portion of the Loan, and
(iii) any other Person as IFC may deem appropriate in connection with any proposed sale, transfer, assignment or other disposition of IFCs rights under this Agreement or any Transaction Document or otherwise for the purpose of exercising any power, remedy, right, authority, or discretion relevant to this Agreement or any other Transaction Document.
(b) Each Obligor acknowledges and agrees that, notwithstanding the terms of any other agreement between any Obligor and IFC, a disclosure of information by IFC in the circumstances contemplated by Section 8.06 (a) does not violate any duty owed to any Obligor under this Agreement or under any such other agreement.
8.07. Indemnification; No Consequential Damages. (a) Each Obligor shall, jointly and severally, indemnify IFC and each Participant and their respective officers, directors, employees, agents and representatives (each, an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, and expenses (including fees, charges and disbursements of counsel) incurred by or asserted against any Indemnitee arising out of, in connection with, or related to (i) the execution, delivery or performance of any Transaction Document or any other agreement or instrument contemplated thereby or the consummation of the Transactions or any other transactions contemplated hereby, (ii) the Loans or the use of proceeds thereof, (iii) non-compliance with any law or regulation, including any environmental law or regulation, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is party thereto; provided that such indemnity will not be available to any Indemnitee to the extent that such losses, claims, damages, liabilities or expenses resulted directly from such Indemnitees gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction.
(b) To the maximum extent permitted by applicable law, no Obligor shall assert, and each Obligor hereby agrees to waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages arising out of, in connection with, or relating to, this Agreement or any agreement or instrument contemplated hereby, the Loans or the use of the proceeds thereof.
8.08. Successors and Assignees. This Agreement binds and benefits the respective successors and assignees of the parties. However, neither the Borrower nor Cañuelas Pack may assign or delegate any of its rights or obligations under this Agreement without the prior written consent of IFC.
8.09. Amendments, Waivers and Consents. Any amendment or waiver of, or any consent given under, any provision of this Agreement shall be in writing and, in the case of an amendment, signed by the parties.
8.10. Counterparts. This Agreement may be executed in several counterparts, each of which is an original, but all of which together constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in their respective names as of the date first above written.
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. | |
|
| |
|
By: |
/s/ Carlos A. Navilli |
|
Name: |
Carlos A. Navilli |
|
Title: |
[ILLEGIBLE] |
|
CAÑUELAS PACK S.A. | |
|
| |
|
By: |
/s/ Carlos A. Navilli |
|
Name: |
Carlos A. Navilli |
|
Title: |
[ILLEGIBLE] |
|
INTERNATIONAL FINANCE CORPORATION | |
|
| |
|
By: |
|
|
Name: |
|
|
Title: |
|
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in their respective names as of the date first above written.
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. | |
|
| |
|
By: |
|
|
Name: |
|
|
Title: |
|
|
CAÑUELAS PACK S.A. | |
|
| |
|
By: |
|
|
Name: |
|
|
Title: |
|
|
INTERNATIONAL FINANCE CORPORATION | |
|
| |
|
By: |
/s/ Martin Spicer |
|
Name: |
Martin Spicer |
|
Title: |
Regional Head of Industry |
ANNEX A
[RESERVED]
Annex A Page 1
ANNEX B
OBLIGOR/TRANSACTION AUTHORIZATIONS
(See Sections 3.01 (d) and 4.02 (d) of the Loan Agreement)
Section (1). Authorizations Already Obtained
(a) Minutes of the Board of Directors of the Borrower approving and authorizing the incurrence of the indebtedness set forth in, and the execution and delivery of, the Agreement and all other agreements and/or documents ancillary thereto (including, without limitation, all and any pagares or similar loan documents).
(b) Minutes of the Board of Directors of each Cañuelas Pack acknowledging the execution and delivery by the Borrower of the Agreement, approving and authorizing Cañuelas Pack to irrevocably, absolutely and unconditionally guarantee to IFC the punctual and complete payment when due and payable (whether at stated maturity or upon prepayment, acceleration or otherwise) of the Guaranteed Obligations and approving and authorizing the execution and delivery of, the Agreement and all other agreements and/or documents ancillary thereto (including, without limitation, all and any pagarés or similar loan documents).
Section (2). Authorizations to be Obtained Prior to, or After, First Additional Disbursement
(b) All requirements set forth in Communications A 3609 and A 5850 and all other applicable regulations by the BCRA, shall have been met, to IFCs satisfaction.
Annex B Page 1
ANNEX C
INVESTMENTS
|
|
|
|
|
|
Investments (in |
| |
Bank |
|
Funds Denomination |
|
Type of Fund |
|
Pesos) |
| |
Industrial and Commercial Bank of China (Argentina) S.A. |
|
ALPHA PESOS CLASE A |
|
Money Market |
|
$ |
61,800,000.00 |
|
|
|
|
|
|
|
|
| |
Industrial and Commercial Bank of China (Argentina) S.A. |
|
ALPHA AHORRO |
|
Local (fixed yield) |
|
$ |
207,000,000.00 |
|
|
|
|
|
|
|
|
| |
Banco Macro |
|
PIONERO RENTA AHORRO |
|
Local (fixed yield) |
|
$ |
207,000,000.00 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Banco Santander Rio |
|
SUPER AHORRO PLUS |
|
Money Market |
|
$ |
77,000,000.00 |
|
|
|
|
|
|
|
|
| |
Banco Santander Rio |
|
SUPER GESTION MIX 6 |
|
Local (fixed yield) |
|
$ |
34,200,000.00 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
$ |
587,000,000.00 |
|
Annex C Page 1
ANNEX D
FINANCIAL DEBT
t.c.v. = |
|
13,99100 |
|
DEUDA BANCARIA: Al 31 de Mayo del 2016
|
|
Molino Cañuelas S.A.C.I.F.I.A. |
|
|
| ||
|
|
U$S |
|
$ |
|
31/05/16 |
|
|
|
|
|
|
|
|
|
Banco de la Nación Argentina |
|
|
|
3.333.333 |
|
238.248 |
|
Banco de la Nación Argentina |
|
10.000.000 |
|
|
|
10.000.000 |
|
Banco Provincia de Buenos Aires |
|
10.000.000 |
|
|
|
10.000.000 |
|
Galicia |
|
16.000.000 |
|
|
|
16.000.000 |
|
Rabobank |
|
25.000.000 |
|
|
|
25.000.000 |
|
ICBC |
|
10.300.000 |
|
|
|
10.300.000 |
|
Santander Rio |
|
6.700.000 |
|
|
|
6.700.000 |
|
Frances |
|
16.000.000 |
|
|
|
16.000.000 |
|
Macro |
|
7.000.000 |
|
|
|
7.000.000 |
|
Comafi |
|
1.500.000 |
|
|
|
1.500.000 |
|
HSBC |
|
15.559.000 |
|
|
|
15.559.000 |
|
Bice |
|
5.000.000 |
|
|
|
5.000.000 |
|
Piano |
|
4.500.000 |
|
|
|
4.500.000 |
|
Supervielle |
|
2.000.000 |
|
|
|
2.000.000 |
|
Itau |
|
14.500.000 |
|
|
|
14.500.000 |
|
J P Morgan |
|
10.000.000 |
|
|
|
10.000.000 |
|
Natixis |
|
25.000.000 |
|
|
|
25.000.000 |
|
Hipotecario |
|
23.400.000 |
|
|
|
23.400.000 |
|
Industrial |
|
2.000.000 |
|
|
|
2.000.000 |
|
Bladex |
|
10.000.000 |
|
|
|
10.000.000 |
|
|
|
|
|
|
|
|
|
CREDITOS de INVERSION |
|
|
|
|
|
|
|
Banco Provincia de Buenos Aires |
|
|
|
18.171.000 |
|
1.298.763 |
|
Banco Provincia de Buenos Aires |
|
|
|
35.169.000 |
|
2.513.687 |
|
Banco Provincia de Buenos Aires |
|
|
|
70.000.000 |
|
5.003.216 |
|
Banco Ciudad |
|
11.676.162 |
|
50.000.000 |
|
15.249.888 |
|
Banco Cordoba - Com 5380 |
|
|
|
833.000 |
|
59.538 |
|
Banco de la Nación Argentina - Com 5319 |
|
|
|
14.875.000 |
|
1.063.183 |
|
Banco de la Nacion Argentina Spegazzini |
|
|
|
30.000.000 |
|
2.144.236 |
|
Banco de la Nacion Argentina Spegazzini |
|
|
|
30.000.000 |
|
2.144.236 |
|
Banco de la Nacion Argentina |
|
|
|
40.277.000 |
|
2.878.779 |
|
Banco Hipotecario |
|
|
|
5.000.000 |
|
357.373 |
|
DEUTSCHE BANK |
|
26.350.000 |
|
|
|
26.350.000 |
|
|
|
|
|
|
|
|
|
|
|
252.485.162 |
|
297.658.333 |
|
273.760.148 |
|
Annex D Page 1
t.c.v. = |
|
13,99100 |
|
DEUDA BANCARIA: A1 3.1 de Mayo da 2016
|
|
Cañueias Pack |
|
|
| ||
|
|
U$S |
|
$ |
|
31/05/16 |
|
|
|
|
|
|
|
|
|
Banoo Provincia de Buenos Aires |
|
|
|
2.000.002 |
|
142.948 |
|
Santander Rio |
|
|
|
828.113 |
|
59.189 |
|
Frances |
|
|
|
4.153.863 |
|
296.895 |
|
Hipolecano |
|
|
|
18.000.000 |
|
1.286 541 |
|
Cordoba |
|
|
|
4.030.200 |
|
288.057 |
|
|
|
|
|
29.012.178 |
|
2.073.631 |
|
Annex D Page 2
ANNEX E
CAPITALIZATION
MOLINO CAÑUELAS S.A.C.I.F.I.A.
Name |
|
C.U.I.T. |
|
% Ownership |
|
NAVILLI, ALDO ADRIANO |
|
23-10053805-9 |
|
25.00 |
% |
NAVILLI, CARLOS ADRIANO |
|
20-12657137-3 |
|
25.00 |
% |
NAVILLI, RICARDO ALBERTO |
|
20-13420134-8 |
|
25.00 |
% |
NAVILLI, ADRIANA ELBA |
|
27-11398465-7 |
|
20.00 |
% |
VILLEMUR, MARCOS |
|
20-26974403-1 |
|
5.00 |
% |
CAÑUELAS PACK S.A.
Name |
|
C.U.I.T. |
|
% Ownership |
|
NAVILLI, ALDO ADRIANO |
|
23-10053805-9 |
|
25.00 |
% |
NAVILLI, CARLOS ADRIANO |
|
20-12657137-3 |
|
25.00 |
% |
NAVILLI, RICARDO ALBERTO |
|
20-13420134-8 |
|
25.00 |
% |
NAVILLI, ADRIANA ELBA |
|
27-11398465-7 |
|
20.00 |
% |
VILLEMUR, MARCOS |
|
20-26974403-1 |
|
5.00 |
% |
MOINHO CANUELAS LTDA
Name |
|
C.U.I.T. |
|
% Ownership |
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. |
|
|
|
99.90 |
% |
GRUPO CAÑUELAS |
|
|
|
0.10 |
% |
EMPRESA DE SERVICIOS MOLCA SRL
Name |
|
C.U.I.T. |
|
% Ownership |
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. |
|
|
|
98.00 |
% |
MOLINO AMERICANO S.A. |
|
|
|
2.00 |
% |
ALIMENTOS CANUELAS BOLIVIA SRL
Name |
|
C.U.I.T. |
|
% Ownership |
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. |
|
|
|
98.00 |
% |
MOLINO AMERICANO S.A. |
|
|
|
2.00 |
% |
ALIMENTOS CANUELAS CHILE SPA
Name |
|
C.U.I.T. |
|
% Ownership |
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. |
|
|
|
100.00 |
% |
Annex E Page 1
ANNEX F
INSURANCE REQUIREMENTS
(See Section 5.04 (a) of the Loan Agreement)
1. CONSTRUCTION WORKS
a) Erection and or installation/Construction All Risks, owner-controlled, based on full contract value and including:
i) Strike, Riot & Civil Commotion
ii) Debris Removal
iii) Extra Expenses
iv) Extended Maintenance Period
v) Third Party Liability
b) Marine Cargo (including war) on transportation of key plant/equipment, unless shipments are on CIF (or comparable) basis
2. ONGOING AND FUTURE OPERATIONS
These policies must be in full force for all plants, with the exception of: Salta, Rio Cuarto, Tres Arroyos, San Justo, Realico and Resistencia.
a) Fire and named perils (including natural perils, and Strike, Riot & Civil Commotion) or Property All Risks, based on new replacement cost of assets
b) Public Liability
c) Products Liability with limit to be reviewed annually
3. AT ALL TIMES
a) All insurances required by applicable laws and regulations
Annex F Page 1
ANNEX G
EXISTING LIENS
Bank |
|
Currency |
|
Mortgage |
|
Pledge |
|
Plant |
| ||
Cooperatieve Centrale Raiffeisen-Boereleenbank B.A.,Rabobank Nederland, New York Branch |
|
USD |
|
USD15,415,000.00 |
|
USD11,435,800.00 |
|
ADELIA MARIA |
| ||
|
|
|
|
|
|
|
|
|
| ||
Cooperatieve Centrale Raiffeisen-Boereleenbank B.A., Rabobank Nederland, New York Branch |
|
USD |
|
USD16,064,394.00 |
|
USD46,564,000.00 |
|
CAÑUELAS |
| ||
|
|
|
|
|
|
|
|
|
| ||
Banco De La Provincia De Buenos Aires |
|
ARS |
|
$ |
36,669,320.00 |
|
$ |
31,969,722.00 |
|
SALTA |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Banco De La Provincia De Buenos Aires |
|
ARS |
|
$ |
58,880,669.00 |
|
$ |
18,689,607.00 |
|
CAÑUELAS |
|
|
|
|
|
|
|
|
|
|
| ||
Banco Ciudad De Buenos Aires |
|
USD |
|
USD18,000,000.00 |
|
|
|
SPEGAZZINI |
|
Annex G Page 1
ANNEX H
METHODOLOGY FOR FINANCIAL RATIO CALCULATIONS
Reference |
|
Ratio |
|
Formula |
|
Comments |
|
|
|
|
Net Income |
|
Depreciations, |
|
|
|
|
Extraordinary Gains |
|
amortizations and other |
|
|
|
|
Non Cash Gains |
|
non cash items should be |
|
|
|
|
+ Extraordinary Losses (Gains)from sale of Assets |
|
added to the extent that |
|
|
EBITDA |
|
other than inventories |
|
they were initially |
|
|
|
|
+ Interest Expense |
|
deducted from Net |
|
|
|
|
+ Tax Expense |
|
Operating Profit |
|
|
|
|
+ Depreciations and Amortizations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials and |
|
|
|
|
Current Financial Debt |
|
Finished Goods are only to |
|
|
Net |
|
+ Non Current Financial Debt |
|
be deducted for the |
|
|
Financial |
|
+ Guarantees Granted to Other Companies |
|
calculation of covenants as |
|
|
Debt |
|
Cash and Equivalents |
|
of the 2nd quarter of the |
|
|
|
|
Raw Materials and Finished Goods |
|
Fiscal Year |
|
|
|
|
|
|
|
|
|
IFC Security |
|
Liquidation Value of IFC Security |
|
|
|
|
to Loan |
|
Outstanding amount of Rabobank and |
|
|
|
|
Coverage |
|
Banco Ciudad Loans |
|
|
|
|
Ratio |
|
Outstanding Principal Amount of IFC Loan |
|
|
|
|
|
|
|
|
|
|
|
Current |
|
Current Assets |
|
|
|
|
Ratio |
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilties |
|
Impairments and Dividend |
|
|
Liabilities to |
|
+ Guarantees Granted to Other Companies |
|
reserves are subtracted to |
|
|
Tangible Net |
|
Paid In Capital + Reserves - Intangible Assets |
|
the extent these have not |
|
|
Worth |
|
Diferred Tax Assets - Impairments |
|
been subtracted already |
|
|
|
|
Dividend Reserves |
|
from Equity. |
|
|
|
|
|
|
|
|
|
|
|
|
|
During the Financial Year, |
|
|
Net |
|
|
|
EBITDA is calculated as the |
|
|
Financial |
|
|
|
sum of EBITDA for the last |
|
|
Debt to |
|
Net Financial Debt |
|
four quarters. At Financial |
|
|
EBITDA |
|
EBITDA |
|
Year end, EBITDA is |
|
|
Ratio |
|
|
|
obtained from the Annual |
|
|
|
|
|
|
Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of Interests and |
|
|
|
|
|
|
Charges on Financial Debt |
|
|
|
|
Net Earnings + Non Cash Items |
|
are included in the |
|
|
Prospective |
|
+Payments of Interests and |
|
denominator to the extent |
|
|
Debt Service |
|
Charges on Financial Debt |
|
they were initially |
|
|
Coverage |
|
Principal payments of Long Term Debt |
|
deducted from net |
|
|
Ratio |
|
+ interest on all Financial Debt for the period |
|
earnings. The denominator |
|
|
|
|
|
|
excludes any voluntary |
|
|
|
|
|
|
prepayment. |
Annex H Page 1
|
|
Peak Debt |
|
Net Earnings + Non Cash Items |
|
|
|
|
Service |
|
+Payments of Interests and |
|
|
|
|
Coverage |
|
Charges on Financial Debt |
|
|
|
|
Ratio |
|
Highest scheduled payment of Long Term debt |
|
|
|
|
|
|
principal + interest and charges on all Financial Debt |
|
|
Annex H Page 2
ANNEX I
PROHIBITED ACTIVITIES
(See Section 5.02(o) of the Loan Agreement)
· Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, ozone depleting substances, PCBs, wildlife or products regulated under CITES.
· Production or trade in weapons and munitions) (1).
· Production or trade in alcoholic beverages (excluding beer, grape juice concentrate and wine) (1).
· Production or trade in tobacco (1).
· Gambling, casinos and equivalent enterprises (1).
· Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where IFC considers the radioactive source to be trivial and/or adequately shielded.
· Production or trade in unbonded asbestos fibers. This does not apply to purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%.
· Drift net fishing in the marine environment using nets in excess of 2.5 km. in length.
· Production or activities involving harmful or exploitative forms of forced labor (2)/harmful child labor (3).
· Commercial logging operations for use in primary tropical moist forest.
· Production or trade in wood or other forestry products other than from sustainably managed forests.
Annex I Page 1
ANNEX J
ANTI-CORRUPTION GUIDELINES
The purpose of these Guidelines is to clarify the meaning of the terms Corrupt Practices, Fraudulent Practices, Coercive Practices, Collusive Practices and Obstructive Practices in the context of IFC operations.
1. CORRUPT PRACTICES
A Corrupt Practice is the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.
INTERPRETATION
A. Corrupt practices are understood as kickbacks and bribery. The conduct in question must involve the use of improper means (such as bribery) to violate or derogate a duty owed by the recipient in order for the payor to obtain an undue advantage or to avoid an obligation. Antitrust, securities and other violations of law that are not of this nature are excluded from the definition of corrupt practices.
B. It is acknowledged that foreign investment agreements, concessions and other types of contracts commonly require investors to make contributions for bona fide social development purposes or to provide funding for infrastructure unrelated to the project. Similarly, investors are often required or expected to make contributions to bona fide local charities. These practices are not viewed as Corrupt Practices for purposes of these definitions, so long as they are permitted under local law and fully disclosed in the payors books and records. Similarly, an investor will not be held liable for corrupt or fraudulent practices committed by entities that administer bona fide social development funds or charitable contributions. .
C. In the context of conduct between private parties, the offering, giving, receiving or soliciting of corporate hospitality and gifts that are customary by internationally-accepted industry standards shall not constitute corrupt practices unless the action violates applicable law.
D. Payment by private sector Persons of the reasonable travel and entertainment expenses of public officials that are consistent with existing practice under relevant law and international conventions will not be viewed as Corrupt Practices.
E. The World Bank Group does not condone facilitation payments. For the purposes of implementation, the interpretation of Corrupt Practices relating to facilitation payments will take into account relevant law and international conventions pertaining to corruption.
2. FRAUDULENT PRACTICES
A Fraudulent Practice is any action or omission, including misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.
Annex J Page 1
INTERPRETATION
A. An action, omission, or misrepresentation will be regarded as made recklessly if it is made with reckless indifference as to whether it is true or false. Mere inaccuracy in such information, committed through simple negligence, is not enough to constitute a Fraudulent Practice for purposes of World Bank Group sanctions.
B. Fraudulent Practices are intended to cover actions or omissions that are directed to or against a World Bank Group entity. It also covers Fraudulent Practices directed to or against a World Bank Group member country in connection with the award or implementation of a government contract or concession in a project financed by the World Bank Group. Frauds on other third parties are not condoned but are not specifically sanctioned in IFC, MIGA, or PRG operations. Similarly, other illegal behavior is not condoned, but will not be sanctioned as a Fraudulent Practice under the World Bank sanctions program as applicable to IFC, MIGA and PRG operations.
3. COERCIVE PRACTICES
A Coercive Practice is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.
INTERPRETATION
A. Coercive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.
B. Coercive Practices are threatened or actual illegal actions such as Personal injury or abduction, damage to property, or injury to legally recognizable interests, in order to obtain an undue advantage or to avoid an obligation. It is not intended to cover hard bargaining, the exercise of legal or contractual remedies or litigation.
4. COLLUSIVE PRACTICES
A Collusive Practice is an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.
INTERPRETATION
Collusive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.
5. OBSTRUCTIVE PRACTICES
An Obstructive Practice is (i) deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making of false statements to investigators, in order to materially impede a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice, and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation, or (ii) acts intended to materially impede the exercise of IFCs access to contractually required information in connection with a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice .
Annex J Page 2
INTERPRETATION
Any action legally or otherwise properly taken by a party to maintain or preserve its regulatory, legal or constitutional rights such as the attorney-client privilege, regardless of whether such action had the effect of impeding an investigation, does not constitute an Obstructive Practice.
GENERAL INTERPRETATION
A Person should not be liable for actions taken by unrelated third parties unless the first party participated in the prohibited act in question.
Annex J Page 3
ANNEX K
DEVELOPMENT IMPACT INDICATORS
Volume of Grains Traded / Milled (MT)
Taxes Paid (US$ million)
Direct employment (# of employees)
Direct female employment (# of female employees)
Wages and Benefits (US$ million)
Farmers reached (#)
Purchases from Domestic Suppliers (US$ millions)
Annex K Page 1
ANNEX L
EXISTING GUARANTEES
|
|
|
|
|
|
Type of |
|
Total Line |
|
Outstanding |
|
Cancellation |
| ||
Borrower |
|
Beneficiary |
|
Guarantee |
|
Line |
|
(000 US$) |
|
(000 US$) |
|
Date |
| ||
CAGSA |
|
ING/Natixus |
|
Corporate Guarantee |
|
Pre-Export Finance |
|
$ |
50,000 |
|
$ |
50,000 |
|
Financial Year 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
CAGSA |
|
FMO |
|
Corporate Guarantee |
|
Pre-Export Finance |
|
$ |
100,000 |
|
$ |
100,000 |
|
Financial Year 2016 |
|
Annex L Page 1
SCHEDULE 1
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY
(See Section 1.01 and Section 4.02(c) of the Loan Agreement)
[Applicable Obligor Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Martin C. Spicer, Regional Head of Industry
Ladies and Gentlemen:
Certificate of Authorized Representative
With reference to the Amended and Restated Loan Agreement dated September 29, 2016 (the Loan Agreement) among Molino Cañuelas S.A.C.I.F.I.A., Cañuelas Pack S.A. and IFC, I, the undersigned [Chairman/Director] of [name of entity], (the [Borrower][ Cañuelas Pack ][Subsidiary Guarantor]), duly authorized to do so, hereby certify that:
1. The Persons named below have been duly elected, have duly qualified as and at all times since ,· (to and including the date hereof) have been officers of [the applicable Obligor], holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures.
Name |
|
Office |
|
Signature |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each such Person is authorized to sign the Transaction Documents and any other request, notice, certification or other document provided for thereunder and to take any other action required or permitted to be taken thereunder.
2. Attached hereto as Exhibit A is a copy of the [charter] of [insert entity] as filed with [name of registry] on ·, together with all amendments thereto adopted through the date hereof.
3. Attached hereto as Exhibit B is a true and correct copy of [resolutions/powers of attorney] duly adopted by the Board of Directors of [entity] (certified by a [ ] notary public) at a meeting on , ·, at which a quorum was present and acting throughout, which [resolutions/powers of attorney] have not been revoked, modified, amended or rescinded and are still in full force and effect.
Sch. 1 Page 1
Except as attached hereto as Exhibit B, no [resolutions/powers of attorney] have been adopted by the Board of Directors of [entity] which deal with the execution, delivery or performance of any of the Transaction Documents.
IN WITNESS WHEREOF, I have hereunto set my hand this day of ·.
|
[Name of Entity] |
|
|
|
|
|
|
|
Name: |
|
Title: |
I, the undersigned, [Secretary/Assistant Secretary] of [entity], DO HEREBY CERTIFY that [Insert name of Person making the above certifications] is the duly elected and qualified [Chief Executive Officer/Chief Financial Officer] of [ ] and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand this day of ·.
|
[Name of Entity] |
|
|
|
|
|
|
|
Name: |
|
Title: |
Sch. 1 Page 2
SCHEDULE 2
FORM OF REQUEST FOR DISBURSEMENT (LOAN)
(See Section 2.02 and Section 4.04 of the Loan Agreement)
[Borrowers Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Martin C. Spicer, Regional Head of Industry
Ladies and Gentlemen:
Investment No. 36533
Request for Loan Additional Disbursement No. [ ]*
1. Please refer to the Amended and Restated. Loan Agreement (the Loan Agreement) dated September 29, 2016, among Molino Cañuelas S.A.C.I.F.I.A. (the Borrower), Cañuelas Pack S.A. and International Finance Corporation (IFC). Terms defined in the Loan Agreement have their defined meanings whenever used in this request.
2. The Borrower irrevocably requests the disbursement on , (or as soon as practicable thereafter) of the amount of under the Additional Loans (the Additional Disbursement) in accordance with the provisions of Section 2.02 of the Loan Agreement. You are requested to pay such amount to the account in [New York] of [Name of Borrower] [Name of correspondent Bank], Account No. at [Name and Address of Bank] [for further credit to the Borrowers Account No. at [Name and address of Bank] in [city and country].
3. For the purpose of Section 4.03 and Section 4.04 of the Loan Agreement, the Borrower certifies as follows:
(a) no Event of Default and no Potential Event of Default has occurred and is continuing;
(b) the proceeds of the Additional Disbursement are at the date of this request needed by the Obligors for the purpose of the Transactions, or will be needed for such purpose within 3 months of such date;
(c) since the date of the Loan Agreement nothing has occurred which has or could reasonably be expected to have a Material Adverse Effect;
* Each to be numbered in series.
Sch. 2 Page 1
(d) since September 29, 2016 no Obligor or any of their respective Subsidiaries has incurred any material loss or liability (except such liabilities as may be incurred by in accordance with Section 5.02 of the Loan Agreement);
(e) the representations and warranties made in Article IV of the Loan Agreement are true on the date of this request and will be true on the date of Additional Disbursement with the same effect as if such representations and warranties had been made on and as of each such date (but in the case of Section 3.01(c), without the words in parenthesis);
(f) the proceeds of the Additional Disbursement are not in reimbursement of, or to be used for, expenditures in the territories of any country that is not a member of the World Bank or for goods produced in or services supplied from any such country;
(g) after giving effect to the Additional Disbursement, no Obligor nor any of their respective Subsidiaries will be in violation of:
(i) its respective Charter;
(ii) any provision contained in any document to which any Obligor or any Subsidiary is a party (including the Loan Agreement) or by which such Obligor or any Subsidiary is bound; or
(iii) any law, rule, regulation, Authorization or agreement or other document binding on such Obligor or any Subsidiary directly or indirectly, limiting or otherwise restricting such Obligors or any Subsidiarys borrowing or guarantee power or authority or its ability to borrow or guarantee; and
The above certifications are effective as of the date of this Request for Additional Disbursement and shall continue to be effective as of the date of the Additional Disbursement. If any of these certifications is no longer valid as of or prior to the date of the requested Additional Disbursement, the Borrower undertakes to immediately notify IFC.
|
Yours truly, | |
|
| |
|
[NAME OF COMPANY] | |
|
| |
|
By |
|
|
Authorized Representative |
Copy to: Manager, Financial Operations Unit
International Finance Corporation
Sch. 2 Page 2
SCHEDULE 3
FORM OF LOAN DISBURSEMENT RECEIPT
(See Section 2.02 of the Loan Agreement)
[Borrowers Letterhead]
International Finance Corporation
2121 Pennsylvania Avenue, N. W.
Washington, D.C. 20433
United States of America
Attention: Manager, Financial Operations Unit
Ladies and Gentlemen:
Investment No. 36533
Additional Disbursement Receipt No.[ ]* (Loan)
We, [Name of Borrower], hereby acknowledge receipt on the date hereof, of the sum of disbursed to us by International Finance Corporation (IFC) under the Additional Loans of provided for in the Amended and Restated Loan Agreement dated September 29, 2016 among our company, Cañuelas Pack S.A. and International Finance Corporation.** [Of this sum, is an A-2 Loan Disbursement and is a B-2 Loan Disbursement.]
|
Yours truly, | |
|
| |
|
[NAME OF COMPANY] | |
|
| |
|
| |
|
By |
|
|
Authorized Representative*** |
*To correspond with number of the Disbursement request. See Schedule 2.
** Please note that in some jurisdictions one has to be able to prove amounts disbursed.
*** As named in the Obligors Certificate of Authorized Representative (see Schedule 1).
Sch. 3 Page 1
SCHEDULE 4
FORM OF PROMISSORY NOTE
(See Section 2.17 of the Loan Agreement)
PAGARÉ
US$ |
|
Buenos Aires, · de · de 201 |
Por igual valor recibido en préstamo, pagaremos incondicionalmente a la vista a International Finance Corporation, sin protesto, NO A LA ORDEN, la cantidad de Dólares Estadounidenses · millones (U$S ·).
El monto adeudado bajo el presente Pagaré devengará (i) un interés compensatorio del · por ciento (·%) anual desde la fecha de su libramiento hasta la fecha del efectivo pago; y (ii) en caso de falta de pago a la fecha de su presentacion al cobro, un interés punitorio del dos por ciento (2%) anual desde la fecha de su presentación al cobro hasta la fecha del efectivo pago.
Todos los pagos a efectuar en virtud de este Pagaré serán efectuados indefectiblemente en Dólares Estadounidenses. El suscriptor renuncia en forma incondicional e irrevocable a invocar la teoría de la imprevisión y onerosidad. sobreviniente (Artículo 1091, del Código Civil y Comercial de la República Argentina).
Todos los montos adeudados en virtud del presente Pagaré serán pagados libres de, y sin deducciones por, impuestos, tasas, gastos, derechos, y/o retenciones, presente o futuros, de cualquier naturaleza o tipo, sean éstos de jurisdiction nacional o provincial de la Argentina, o impuestos cobrados por cualquier autoridad impositiva de la Argentina. En caso de ser aplicable algún impuesto, tasa, cargo, gasto, derecho y/o retentión de la índole mencionada, éste será pagado exclusivamente por el suscriptor.
En nuestro carácter de suscriptores, hacemos constar expresamente que ampliamos el plazo de presentación para el pago de este Pagaré hasta nueve (9) años a contar desde la fecha.
Lugar de pago: 2121 Pennsylvania Av. N.W., Washington DC 20433, Estados Unidos de América.
|
MOLINO CAÑUELAS S.A.C.I.F.I.A. | ||
|
| ||
|
Por: |
|
|
|
|
|
|
|
|
Nombre: |
|
|
|
Cargo: |
|
Sch. 4 Page 1
POR AVAL:
CAÑUELAS PACK S.A.
Por: |
|
|
|
|
|
|
|
|
|
Nombre: |
|
|
|
Cargo: |
|
[EMPRESA DE SERVICIOS MOLCA SRL |
ALIMENTOS CANUELAS BOLIVIA SRL | |||
|
| |||
|
| |||
Por: |
|
|
Por: |
|
|
|
|
|
|
|
Nombre: |
|
|
Nombre: |
|
Cargo: |
|
|
Cargo: |
|
| |||
|
| |||
ALIMENTOS CANUELAS CHILE SPA |
MOINHO CANUELAS LTDA | |||
|
| |||
|
| |||
Por: |
|
|
Por: |
|
|
|
|
|
|
|
Nombre: |
|
|
Nombre: |
|
Cargo: |
|
|
Cargo: ] |
[NOTARY PUBLIC CERTIFICATION SIGNATURES & SIGNATORIES CAPACITY/ VALID BOARD OF DIRECTORS OR SHAREHOLDERS MEETING RESOLUTIONS NEEDED FROM SUBSIDIARY GUARANTORS]
Sch. 4 Page 2
SCHEDULE 5
FORM OF SOLVENCY CERTIFICATE
This Solvency Certificate (the Certificate) of [entity] a [ ] organized and existing under the laws of [ ] (the Borrower/Guarantor/ Cañuelas Pack), is delivered pursuant to Section 4.02[(1)] of the Amended and Restated Loan Agreement dated September 29, 2016 (as the same may be amended from time to time, the Loan Agreement) between the Borrower [other Obligor] and IFC. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Loan Agreement.
I, [NAME], the duly elected, qualified and acting [TITLE] of [the Borrower](1), DO HEREBY CERTIFY as follows:
1. I have carefully reviewed the Loan Agreement and the other Transaction Documents and such other documents as I have deemed relevant and the contents of this Certificate and, in connection herewith, have made such investigation, as I have deemed necessary therefor. I further certify that the financial information and assumptions which underlie and form the basis for the representations made in this Certificate were reasonable when made and were made in good faith and continue to be reasonable as of the date hereof.
2. I have reviewed all financial information delivered to IFC pursuant to Articles III and IV of the Loan Agreement (the Information). I am familiar with the financial performance and prospects of [the Borrower] and hereby confirm that the Information was prepared in good faith and fairly presents [the Borrowers] consolidated financial condition, based on the information available to [the Borrower] at the time so furnished.
3. As of the date hereof, after giving effect to the transactions contemplated by the Transaction Documents, the fair value (as defined herein) and the present fair salable value (as defined herein) of any and all property of [the Borrower] is greater than the probable liability on existing debts (as defined herein) of [the Borrower] as they become absolute and matured.
4. As of the date hereof, after giving effect to the transactions contemplated by the Transaction Documents, [the Borrower] is able to pay its debts (including, without limitation, contingent and subordinated liabilities) as they become absolute and mature (as defined herein).
5. [The Borrower] does not intend to, nor believes that it will, incur debts that would be beyond its ability to pay as such debts mature.
6. As of the date hereof, after giving effect to the transactions contemplated by the Transaction Documents, [the Borrower] is not engaged in businesses or transactions, nor about to engage in businesses or transactions, for which any property remaining would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which it is engaged.
7. [The Borrower] does not intend, in consummating the transactions contemplated by the Transaction Documents, to hinder, delay or defraud either present or future lenders or any other Person to which [the Borrower] is or will become, on or after the date hereof, indebted.
(1) Replace with Guarantor in applicable certificate.
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8. For purposes of this Certificate, fair value means the amount at which the aggregate assets of [the Borrower] would change hands between a willing buyer and a willing seller within a commercially reasonable period of time, each having reasonable knowledge of the relevant facts, neither being under any compulsion to act, with equity to both. Present fair salable value means the amount that may be realized if the aggregate assets of [the Borrower] are sold with reasonable promptness in an arms length transaction under present conditions for the sale of assets of comparable business enterprises. The term debt means any legal liability, including, without limitation, any contingent, subordinated, absolute, fixed, matured or unmatured, disputed or undisputed, secured or unsecured and liquidated or unliquidated liability. Being able to pay its debts as they become absolute and mature means that, assuming transactions contemplated by the Transaction Documents have been consummated as proposed and based only upon [the Borrower] financial forecasts, [the Borrower] would have positive cash flow for the period covered by such forecasts after paying its scheduled anticipated indebtedness and current liabilities, including, (and after giving effect to) the scheduled principal payments with respect to the Loans under the Loan Agreement as in effect on the date hereof.
IN WITNESS WHEREOF, I have executed this Certificate this [DATE]
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SCHEDULE 6
FORM OF SERVICE OF PROCESS LETTER
[Letterhead of Agent for Service of Process]
(See Section 4.02[(m)] of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
Attention: Martin C. Spicer
Regional Head of Industry
Re:
Dear Sirs:
Reference is made to (i) Section 8.05(e) of the Amended and Restated Loan Agreement dated September 29, 2016 (the Loan Agreement) among Molino Cañuelas S.A.C.I.F.I.A. (the Borrower), Cañuelas Pack S.A. (Cañuelas Pack) and International Finance Corporation (IFC). Unless otherwise defined herein, capitalized terms used herein shall have the meaning specified in the Loan Agreement.
Pursuant to Section 8.05(e) of the Loan Agreement, each of the Borrower and the has irrevocably designated and appointed the undersigned, [ ] with offices currently located at [ ,] as its authorized agent to receive for and on its behalf service of process in any legal action or proceeding with respect to the Loan Agreement in the courts of the United States of America for the Southern District of New York or in the courts of the State of New York located in the Borough of Manhattan.
The undersigned hereby informs you that it has irrevocably accepted that appointment as process agent as set forth in Section 8.05(e) of the Loan Agreement, from until and agrees with you that the undersigned (i) shall inform IFC promptly in writing of any change of its address in [New York], (ii) shall perform its obligations as such process agent in accordance with the relevant provisions of Section 8.05(e) of the Loan Agreement, and (iii) shall forward promptly to the Borrower, Cañuelas Pack or the applicable Subsidiary Guarantor, as applicable, any legal process received by the undersigned in its capacity as process agent.
As process agent, the undersigned and its successor or successors agree to discharge the abovementioned obligations and will not refuse fulfillment of such obligations as provided under Section 8.05(e) of the Loan Agreement.
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[NAME OF PROCESS AGENT] | |
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SCHEDULE 7
FORM OF LETTER TO OBLIGORS AUDITORS
(See Section 4.02[(k)] and Section 5.01(f) of
the Loan Agreement)
[Applicable Obligors Letterhead]
[Date]
[NAME OF AUDITORS]
[ADDRESS]
Ladies and Gentlemen:
We hereby authorize and request you to give to International Finance Corporation of 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433, United States of America (IFC), all such information as IFC may reasonably request with regard to the financial statements of the undersigned company, both audited and unaudited. We have agreed to supply that information and those statements under the terms of an Amended and Restated Loan Agreement between the undersigned companies and IFC dated September 29, 2016 (the Loan Agreement). For your information we enclose a copy of the Loan Agreement.
We authorize and request you to send two copies of the audited accounts of the undersigned companies to IFC to enable us to satisfy our obligation to IFC under Section 5.03(b)(i) of the Loan Agreement. When submitting the same to IFC, please also send, at the same time, a copy of your full report on such accounts in a form reasonably acceptable to IFC.
Please note that under Section 5.03(b)(i) and (iii) and Section 5.03(c) of the Loan Agreement, we are obliged to provide IFC with:
(a) a copy of the annual and any other management letter or other communication from you to the undersigned companies or its respective management commenting on, among other things, the adequacy of the undersigned companies financial control procedures and accounting and management information system; and
(b) an unqualified audit report on the audited financial statements to the effect that such financial statements present fairly the financial condition and results of operations of undersigned companies and their Subsidiaries.
Please also submit each such communication and report to IFC with the audited accounts.
For our records, please ensure that you send to us a copy of every letter that you receive from IFC immediately upon receipt and a copy of each reply made by you immediately upon the issue of that reply.
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Yours truly, | |
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[NAME OF OBLIGOR] | |
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Authorized Representative | |
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[NAME OF OBLIGOR] | |
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Authorized Representative | |
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[Insert names of Subsidiaries] |
Enclosure | |
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Martin C. Spicer |
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Regional Head of Industry |
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International Finance Corporation |
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2121 Pennsylvania Avenue, N.W. |
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Washington, D.C. 20433 |
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United States of America |
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SCHEDULE 8
[FORM OF OBLIGORS CERTIFICATION
ON DISTRIBUTION OF DIVIDENDS]
(See Section 5.02(a) of the Loan Agreement)
[the applicable Obligors Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
Attention: Martin C. Spicer
Regional Head of Industry
Re:
Dear Sirs:
1. Please refer to the Amended and Restated Loan Agreement (the Loan Agreement) dated September 29, 2016 among [Name of Obligor] (the Obligor) [Affiliate] and International Finance Corporation (IFC). Terms defined in the Loan Agreement have their defined meanings whenever used in this request.
2. This is to inform you that the Obligor plans a distribution of dividends to its shareholders in the aggregate amount of , such distribution to commence on or about , . Pursuant to Section 5.02(a) of the Loan Agreement, the Obligor hereby certifies that, as at the date hereof:
(a) the Obligor had a Net Income in excess of $0.00 for the most recently ended Calculation Period;
(b) the proposed distribution will be entirely out of retained earnings and such retained earnings do not include any amount resulting from the revaluation of any of the Borrowers assets;
(c) no Event of Default or Potential Event of Default has occurred and is continuing;
(d) after giving effect to the proposed distribution:
(i) the Current Ratio of the Borrower is at least 1.2 to 1.0;
(ii) the Net Financial Debt to EBITDA Ratio of the Borrower is not more than [ ] to 1.0;
(iii) the Liabilities to tangible Net Worth Ratio of the Borrower is not less than [ ] to 1.0;
(iv) a ratio of (x) the net orderly liquidation value of the assets subject to the IFC Security over which IFC has the Applicable Priority Security Interest, determined
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based on the most recently delivered appraisal under Section 5.01(m) to (y) the outstanding balance of each of the Loans, of not less than 1.5 to 1.0
(v) the Prospective Debt Coverage Ratio is not more than 1.4 to 1.0; and
(vi) the Financial Debt of Cañuelas Pack is $[ ] which is less than $5,000,000; and
(vii) Tangible Net Worth of Cañuelas Pack is $[ ] which is not less than $5,000,000.
3. The Obligor undertakes not give effect to the proposed distribution or any part thereof if, at the time of so doing or after giving effect to it, the Borrower could not certify the matters referred to in section 2 of this certification.
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SCHEDULE 9
FORM OF SUBSIDIARY GUARANTEE
[See Attached]
Sch. 8 Page 3
INVESTMENT NUMBER 36533
Guarantee Agreement
Between
[GUARANTOR]
and
INTERNATIONAL FINANCE CORPORATION
Dated , 20
Sch. 8 Page 4
ARTICLE I DEFINITIONS AND INTERPRETATION |
1 |
Section 1.01Defined Terms |
1 |
Section 1.02Interpretation |
2 |
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ARTICLE II GUARANTEE |
2 |
Section 2.01Guarantee |
2 |
Section 2.02No Set-off |
3 |
Section 2.03Taxes |
3 |
Section 2.04Certificate Conclusive |
3 |
Section 2.05Application of Payments |
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Section 2.06Allocation |
4 |
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ARTICLE III WAIVERS; SAVINGS PROVISIONS |
4 |
Section 3.01 Waiver of Defenses |
4 |
Section 3.02Waiver of Notices, Claims and Prior Action |
4 |
Section 3.03Consent |
4 |
Section 3.04Absolute Guarantee |
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Section 3.05Additional Security |
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ARTICLE IV NON-COMPETITION; BANKRUPTCY; REINSTATEMENT |
5 |
Section 4.01Non-Competition |
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Section 4.02Bankruptcy or Liquidation of Borrower |
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Section 4.03Appropriation and Application of Monies |
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Section 4.04Reinstatement |
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ARTICLE V REPRESENTATIONS AND WARRANTIES |
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Section 5.01Representations and Warranties |
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Section 5.02IFC Reliance |
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Section 5.03Rights and Remedies not Limited |
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Section 5.04Limitation |
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ARTICLE VI COVENANTS |
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Section 6.01 Subsidiary Guarantors Covenants |
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ARTICLE VII MISCELLANEOUS |
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Section 7.01Notices |
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Section 7.02English Language |
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Section 7.03Expenses |
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Section 7.04Remedies and Waivers |
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Section 7.05Governing Law; Jurisdiction and Enforcement |
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Section 7.06Successors and Assigns |
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Section 7.07Integration; Effectiveness |
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Section 7.08Amendment |
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Section 7.09Counterparts |
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Sch. 8 Page ii
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (this Agreement) dated [ ], 20[ ] between [ ], a [corporation] [company] organized and existing under the laws of [ ] (the Subsidiary Guarantor), and INTERNATIONAL FINANCE CORPORATION, an international organization established by Articles of Agreement among its member countries (IFC).
WHEREAS:
(A) By an amended and restated loan agreement (as amended, restated or otherwise modified from time to time, the Loan Agreement) dated September 29, 2016 among IFC, Molino Cañuelas S.A.C.I.F.I.A., a sociedad anonima comercial industrial financiera inmobiliaria y agropecuaria organized and existing under the laws of the Republic of Argentina (the Borrower), Cañuelas Pack S.A., a sociedad anonima organized and existing under the laws of the Republic of Argentina (the Affiliate Guarantor), IFC has agreed to extend to the Borrower loans (collectively, the Loan) consisting of (i) an A Loan in an aggregate amount of up to $60,000,000.00, and (ii) a B Loan in an aggregate amount of up to $95,000,000.00, on the terms and subject to the conditions set forth in the Loan Agreement.
(B) By virtue of Section 5.01(1) of the Loan Agreement, it is a condition of the making and maintenance of the Loans that the Subsidiary Guarantor has guaranteed the obligations of the Borrower in respect of the Loan and the other Transaction Documents.
(C) The Subsidiary Guarantor is a [wholly-owned] [majority-owned] [direct] [indirect] subsidiary of the [Borrower] [Affiliate Guarantor].
(D) The Subsidiary Guarantor will obtain benefits as a result of the Loans being made to the Borrower and, accordingly, desires to guarantee such obligations of the Borrower in order to satisfy the condition described in Recital B above and to induce IFC to make and maintain the Loan.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Definitions and Interpretation
1.01. Defined Terms. (a) Each capitalized term used and not otherwise defined herein, unless the context otherwise requires, has the meaning assigned to such term in the Loan Agreement.
(b) As used in this Agreement, unless the context otherwise requires, the following terms have the following meanings:
Financial Year means the accounting year of the Subsidiary Guarantor commencing each year on [ ] and ending on the following [ ], or such other period as the Subsidiary Guarantor, with IFCs consent, from time to time designates as its accounting year;
Sch. 9 Page 1
Guarantee means the guarantee given pursuant to this Agreement; and
Termination Date has the meaning given in Section 2.01(b).
1.02. Interpretation. In this Agreement, unless the context otherwise requires:
(a) headings are for convenience only and do not affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) a reference to an Annex, Article, party, Schedule or Section is a reference to that Article or Section of, or that Annex, party or Schedule to, this Agreement;
(d) a reference to a document includes an amendment or supplement to, or replacement or novation of, that document but disregarding any amendment, supplement, replacement or novation made in breach of this Agreement or the Loan Agreement; and
(e) a reference to a party to any document includes that partys successors and permitted assigns.
ARTICLE II
Guarantee
2.01. Guarantee. (a) The Subsidiary Guarantor irrevocably, absolutely and unconditionally: (i) guarantees, as a primary obligor and not merely as surety, to IFC the punctual and complete payment when due and payable (whether at stated maturity or upon prepayment, acceleration or otherwise) of the Guaranteed Obligations; and (ii) undertakes with IFC that whenever the Borrower does not pay any amount of the Guaranteed Obligations when so due the Subsidiary Guarantor will immediately, and in any event forthwith upon demand by IFC, pay that amount to IFC, in the currency prescribed in the Loan Agreement or the relevant Transaction Document, and otherwise in the same manner in all respects as the Guaranteed Obligations are required to be paid by the Borrower.
(b) The Guarantee is a continuing obligation of the Subsidiary Guarantor (and all Guaranteed Obligations are, or when created will be, conclusively presumed to have been created in reliance on this Agreement) and will remain in full force and effect until the day on which: (i) the Loans have been fully disbursed or any undisbursed portion thereof has been cancelled; and (ii) all Guaranteed Obligations have been paid in full (such day, the Termination Date).
(c) The Guarantee is a guarantee of payment and not of collection and constitutes an additional, separate and independent obligation of the Subsidiary Guarantor which will survive the termination of the Loan Agreement, any other Transaction Document and any other agreement or instrument pursuant to which any Guaranteed Obligation is or may become outstanding.
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(d) The Subsidiary Guarantors obligations under this Agreement can be discharged only by performance and then only to the extent of such performance.
2.02. No Set-off. All payments which the Subsidiary Guarantor is required to make under this Agreement shall be made without any set-off, counterclaim or condition.
2.03. Taxes. (a) The Subsidiary Guarantor shall pay or cause to be paid all Taxes (other than taxes, if any, payable on the overall income of IFC) on or in connection with the payment of any and all amounts due under this Agreement that are now or in the future levied or imposed by any Authority of the Country or any jurisdiction through or out of which a payment is made on or in connection with the payment of any and all amounts due under this Agreement.
(b) All payments due under this Agreement shall be made without deduction for or on account of any such Taxes.
(c) If the Subsidiary Guarantor is prevented by operation of law or otherwise from complying with subsection (b) above, the amount due under this Agreement shall be increased to such amount as may be necessary so that IFC receives the full amount it would have received (taking into account any Taxes payable on the amount payable by the Subsidiary Guarantor under this subsection) had those payments been made without deduction as set forth in subsection (b) above.
(d) If subsection (c) above applies and IFC so requests, the Subsidiary Guarantor shall deliver to IFC official tax receipts evidencing payment of such Taxes (or certified copies of them) within 30 days of the date of that request.
(e) Subsections (a) and (b) above do not apply to Taxes which directly result from a Participant (or, as the case may be, a participant with a comparable participation in any A Loan) having its principal office in the Country or having or maintaining a permanent office or establishment in the Country, if and to the extent that permanent office or establishment acquires the relevant Participation (or a comparable participation in any A Loan).]
2.04. Certificate Conclusive. A certificate of IFC stating:
(a) the amount of the Guaranteed Obligations (whether currently due and payable or not); or
(b) any amount due and payable by the Subsidiary Guarantor under this Agreement; when delivered will be conclusive in the absence of manifest error.
2.05. Application of Payments. IFC may apply any monies received by it or recovered under:
(a) any Security; and
(b) any other document or agreement which is a security for any of the Guaranteed Obligations,
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in such manner as it determines in its absolute discretion.
2.06. Allocation. If the Subsidiary Guarantor at any time pays to IFC an amount less than the full amount then due and payable to IFC under this Agreement, IFC may allocate and apply such payment in any way or manner and for such purpose or purposes as IFC in its sole discretion determines, notwithstanding any instruction that the Subsidiary Guarantor, the Borrower or any other Person may give to the contrary.
ARTICLE III
Waivers; Savings Provisions
3.01. Waiver of Defenses. The Subsidiary Guarantors obligations under this Guarantee will not be affected or impaired by any act, omission, circumstance (other than complete payment of the Guaranteed Obligations), matter or thing which, but for this Section or any of the other provisions in this Article III, would reduce, release or prejudice any of its obligations under this Agreement or which might otherwise constitute a legal or equitable discharge or defense of the Subsidiary Guarantor under any applicable law.
3.02. Waiver of Notices, Claims and Prior Action. The Subsidiary Guarantor hereby waives to the fullest extent permitted by any applicable law:
(a) notice of acceptance of the Guarantee;
(b) notice of the creation, extension or accrual of any of the Guaranteed Obligations;
(c) notice of presentment, demand, dishonor, non-payment, protest, or other default with respect to any of the Guaranteed Obligations;
(d) notice of any other nature whatsoever to any Person (including the Subsidiary Guarantor and any other guarantor);
(e) any requirement that IFC take any action whatsoever against the Borrower or any other Person (including the Subsidiary Guarantor or any other guarantor) or file any claim in the event of the bankruptcy of the Borrower, Subsidiary Guarantor or any other Person; and
(f) any claims based on IFCs failure to protect, perfect, preserve, or resort to the Security or any other collateral securing the Guaranteed Obligations.
3.03. Consent. The Subsidiary Guarantor hereby irrevocably consents that from time to time, and without further notice to or consent of the Subsidiary Guarantor, IFC may take any or all of the following actions without affecting or impairing the Guarantee or any of the Subsidiary Guarantors obligations under this Agreement:
(a) extend, renew, modify, amend, compromise, settle or release the Guaranteed Obligations, or agree to any composition, forbearance or concession in respect thereof;
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(b) release or compromise any liability of any Person or Persons with respect to the Guaranteed Obligations;
(c) release the Security or exchange, surrender, realize upon or otherwise deal with the Security as IFC may determine in its sole discretion;
(d) exercise or refrain from exercising any of its rights or remedies under this Agreement, any other Transaction Document or under law or equity; and
(e) act or fail to act in any manner which may deprive the Subsidiary Guarantor of its right to subrogation against the Borrower or its right to contribution against any co-guarantor.
3.04. Absolute Guarantee. The Guarantee is absolute and unconditional and will not be affected or impaired by:
(a) any failure of the Borrower or the Subsidiary Guarantor to comply with any requirement of any law, regulation or order;
(b) the dissolution, liquidation, reorganization or other alteration of the legal status or structure of the Borrower or the Subsidiary Guarantor;
(c) any purported or actual assignment of the Loans or any part thereof by IFC to any other Person;
(d) the Loan Agreement, any other Transaction Document or any of the Guaranteed Obligations being in whole or in part illegal, void, voidable, avoided, invalid, unenforceable or otherwise of limited force and effect; or
(e) any other circumstance or occurrence whatsoever that might otherwise constitute a defense available to, or discharge of, the Subsidiary Guarantor or any other guarantor or surety.
3.05. Additional Security. This Agreement is in addition to and is and will not be in any way prejudiced by any collateral or other security now or in the future held by IFC, nor is nor will any such collateral or other security held by IFC or the liability of any Person for all or any part of the Guaranteed Obligations be in any manner prejudiced or affected by this Agreement.
ARTICLE IV
Non-Competition; Bankruptcy; Reinstatement
4.01. Non-Competition. (a)Until the Termination Date, the Subsidiary Guarantor shall not in respect of any amounts that have become payable or have been paid by the Subsidiary Guarantor under this Agreement, seek to enforce repayment or contribution, obtain the benefit of any security or exercise any other rights or legal remedies of any kind which may accrue to the Subsidiary Guarantor against the Borrower or any other guarantor of the Guaranteed Obligations, whether by way of subrogation, offset, counterclaim or otherwise, in respect of the amount so payable or so paid.
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(b) The Subsidiary Guarantor shall hold in trust for, and forthwith pay or transfer to, IFC any payment or distribution or benefit of security received by it contrary to subsection (a) above.
(c) Upon the Termination Date: (i) the Subsidiary Guarantor, if it has made any payment under this Agreement, will be entitled to exercise its rights of subrogation to its proportion of all relevant rights of IFC against the Borrower pursuant to the Loan Agreement and the other Transaction Documents; and (ii) IFC shall, if requested by the Subsidiary Guarantor and at the expense of the Subsidiary Guarantor, execute and deliver to the Subsidiary Guarantor appropriate documents, without recourse and without representation and warranty, necessary to evidence the transfer by subrogation to the Subsidiary Guarantor of such interest in the Guaranteed Obligations as may result from any payment under this Agreement.
4.02. Bankruptcy or Liquidation of Borrower. If the Borrower is adjudged bankrupt or insolvent, or a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower, or any substantial part of its property or other assets, is appointed, or the Borrower makes any arrangement with its creditors, or is liquidated or wound up, the Subsidiary Guarantor shall not claim, rank, prove or vote as a creditor of the Borrower or its estate in competition with IFC in respect of any amounts owing to the Subsidiary Guarantor by the Borrower on any account whatsoever, but instead shall give IFC the benefit of any such proof and of all amounts to be received in respect of that proof until all Guaranteed Obligations have been fully paid.
4.03. Appropriation and Application of Monies. Until the Termination Date, IFC (or any trustee, agent or other Person acting on its behalf) may:
(a) refrain from applying or enforcing any other monies, security or rights held or received by IFC (or such trustee, agent or other Person) in respect of the Guaranteed Obligations, or apply and enforce the same in such manner and order as it determines in its absolute discretion (whether against the Guaranteed Obligations or otherwise) and the Subsidiary Guarantor shall not be entitled to the benefit of the same; and
(b) hold and keep for such time as it thinks prudent any monies received, recovered or realized under this Agreement, to the credit either of the Subsidiary Guarantor or such other Person or Persons as it determines in its sole discretion or in a suspense account.
4.04. Reinstatement. (a)The Guarantee will be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or the Subsidiary Guarantor in respect of the Guaranteed Obligations is avoided, rescinded or must otherwise be restored or returned by any recipient thereof, whether as a result of any proceedings in bankruptcy or reorganization, insolvency, dissolution, receivership, liquidation, arrangement, composition or assignment for the benefit of creditors of the Borrower, the Subsidiary Guarantor or any other Person, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower, the Subsidiary Guarantor or any substantial part of their respective property, or otherwise, all as though such payment had not been made.
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(b) IFC (or any trustee, agent or other Person acting on its behalf) may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration, and any such action will not preclude reinstatement pursuant to subsection (a) above.
ARTICLE V
Representations and Warranties
5.01. Representations and Warranties. The Subsidiary Guarantor represents and warrants that as of the date of this Agreement:it is a [corporation] [company] duly organized and validly existing under the laws of [ ], and has the corporate power to conduct its business as currently conducted and to enter into, and perform its obligations under, this Agreement;
(b) the execution and delivery by it of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all necessary actions, corporate or otherwise;
(c) this Agreement has been duly executed and delivered by it and constitutes its valid and legally binding obligation, enforceable in accordance with its terms;
(d) neither the execution and delivery by it of this Agreement nor the performance by it of its obligations under this Agreement conflicts or will conflict with or results or will result in any breach of any of the terms, conditions or provisions of, or violates or will violate or constitutes or will constitute a default under or requires or will require any consent under: (i) any indenture, mortgage, contract, agreement or other instrument or arrangement to which it is a party or which purports to be binding upon it or any of its property or assets, and will not result in the imposition or creation of any lien, charge, or encumbrance on, or security interest in, any part thereof pursuant to the provisions of any such agreement, instrument or arrangement; or (ii) any of the terms or provisions of its Charter; or (iii) any statute, rule or regulation or any judgment, decree or order of any court, governmental authority, bureau or agency binding on or applicable to it;
(e) all Authorizations required for the execution and delivery of this Agreement by it and the performance by it of its obligations hereunder have been duly obtained or granted and are in full force and effect;
(f) neither the Subsidiary Guarantor nor any of its property enjoys any right of immunity from set-off, suit or execution with respect to its assets or its obligations under this Agreement;
(g) the Subsidiary Guarantor has adequate means to obtain from the Borrower, on a continuing basis, information concerning the financial condition of the Borrower, and it does not rely on IFC to provide such information, now or in the future;
(h) the Subsidiary Guarantor has received a copy of the Loan Agreement [and each other Transaction Document.
Sch. 9 Page 7
(i) the benefit received by it represents reasonably equivalent value and fair consideration for the Subsidiary Guarantors issuance of this Guarantee; and
(j) at all times relevant hereto, it is or will be solvent, and it is not currently subject to or contemplating filing a petition under any bankruptcy or insolvency law and, to the knowledge of the Subsidiary Guarantor, no Person is currently contemplating the filing of any such petition against the Subsidiary Guarantor.
5.02. IFC Reliance. (a)The Subsidiary Guarantor acknowledges that it makes the representations in Section 5.01 with the intention of inducing IFC to enter into this Agreement and that IFC enters into this on the basis of, and in full reliance on, each of such representations.
(b) The Subsidiary Guarantor warrants to IFC (for itself and on behalf of the Participants) that each of such representations is true and correct in all material respects as of the date of this Agreement and that none of them omits any matter the omission of which makes any of such representations misleading.
5.03. Rights and Remedies not Limited. IFCs rights and remedies in relation to any misrepresentation or breach of warranty on the part of the Subsidiary Guarantor are not prejudiced:by any investigation by or on behalf of IFC (or the Participants) into the affairs of the Subsidiary Guarantor;
(b) by the execution or the performance of this Agreement or the Participation Agreement; or
(c) by any other act or thing which may be done by or on behalf of IFC (or the Participants) in connection with this Agreement and which might, apart from this Section 5.03, prejudice such rights or remedies.
5.04. Limitation. Wherever possible, each provision of this Article V will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Article V is prohibited by or invalid under such law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Article V. Consistent with the foregoing, and notwithstanding any other provision of this Article V to the contrary, in the event that any action or proceeding is brought in whatever form and in whatever forum seeking to invalidate the Subsidiary Guarantors obligations hereunder under any fraudulent conveyance, fraudulent transfer theory, or similar avoidance theory, whether under state or federal law, the Subsidiary Guarantor, automatically and without any further action being required of the Subsidiary Guarantor or IFC, shall be liable hereunder only for an amount equal to the maximum amount of liability that could have been incurred under applicable law by the Subsidiary Guarantor under any guaranty of the Guaranteed Obligations (or any portion thereof) at the time of the execution and delivery of this Agreement (or, if such date is determined not to be the appropriate date for determining the enforceability of such Subsidiary Guarantor s obligations hereunder for fraudulent conveyance or transfer (or similar avoidance) purposes, on the date determined to be so appropriate) without rendering such a hypothetical guaranty voidable under applicable law relating to fraudulent conveyance, fraudulent transfer, or any other grounds for avoidance (such
Sch. 9 Page 8
highest amount determined hereunder being such Guarantors Maximum Guaranty Amount), and not for any greater amount, as if the stated amount hereunder as to the Subsidiary Guarantor had instead been the Maximum Guaranty Amount. This paragraph is intended solely to preserve the rights of IFC hereunder to the maximum extent not subject to avoidance under applicable Law, and neither the Subsidiary Guarantor nor any other Person shall have any right or claim under this paragraph with respect to the limitation described hereunder, except to the extent necessary so that the obligations of the Subsidiary Guarantor under hereunder shall not be rendered voidable under applicable Law.
ARTICLE VI
Covenants
6.01. Subsidiary Guarantors Covenants. The Subsidiary Guarantor shall:
(a) when requested by IFC, do or cause to be done anything which aids the exercise of any power, right or remedy of IFC under this Agreement including, but not limited to, the execution of any document or agreement;
(b) obtain, maintain and renew when necessary all Authorizations required under any law or document or agreement: (i) to enable it to perform its obligations under this Agreement; or (ii) for the validity or enforceability of this Agreement;
(c) comply in all respects with the terms of the Authorizations referred to in subsection (b) above;
(d) comply in all respect with the terms of the Loan Agreement applicable to Subsidiaries; and
(e) If IFC so requests, upon any issuance of Notes and prior to delivery thereof, endorse its guarantee upon such Notes, in form and substance satisfactory to IFC. The Subsidiary Guarantor shall provide to IFC such evidence as IFC reasonably requests of the authority of the Person or Persons who will sign the endorsement of guarantee upon the Notes. No failure by the Subsidiary Guarantor to endorse its guarantee upon the Notes as herein provided will affect the existence, validity or enforceability of this Agreement.
ARTICLE VII
Miscellaneous
7.01. Notices. Any notice, request, or other communication to be given or made under this Agreement shall be in writing. The notice, request or other communication may be delivered by hand, airmail, facsimile or established courier service to the partys address specified below or at such other address as such party notifies to the other party from time to time and will be effective upon receipt or, in the case of delivery by hand or by established courier service, upon refusal to accept delivery.
For the Subsidiary Guarantor:
Sch. 9 Page 9
[ ]
Attention:
Facsimile: [ ]
For IFC:
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Martin C. Spicer
Regional Head of Industry
Facsimile: +1 (202) 974-[ ]
With a copy (in the case of notices relating to payments) to:
Director, Financial Operations Department
Facsimile: +1 (202) 522-3064
With an electronic copy (in the case of all reports and notices to be given under Section 6.01(d) (Subsidiary Guarantors Covenants)) sent to the attention of the Manager, B Loan Management Unit, at:
syndicatedloanreports@ifc.org.
7.02. English Language. All documents to be furnished or communications to be given or made under this Agreement shall be in the English language or, if in another language, shall be accompanied by a translation into English satisfactory to IFC certified by a representative of the Subsidiary Guarantor, which translation shall be the governing version between the Subsidiary Guarantor and IFC.
7.03. Expenses. The Subsidiary Guarantor shall pay to IFC or as IFC may direct, the costs and expenses incurred by IFC in relation to the enforcement or protection or attempted enforcement or protection of its rights under this Agreement, including reasonable legal and other professional consultants fees.
7.04. Remedies and Waivers. No failure or delay by IFC in exercising any power, remedy, discretion, authority or other right under this Agreement shall waive or impair that or any other right of IFC. No single or partial exercise of such a right shall preclude its additional or future exercise. All waivers or consents given under this Agreement shall be in writing. No such waiver shall waive any other right under this Agreement.
Sch. 9 Page 10
7.05. Governing Law; Jurisdiction and Enforcement. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, United States of America.
(b) For the exclusive benefit of IFC, the Subsidiary Guarantor irrevocably agrees that any legal action, suit or proceeding arising out of or relating to this Agreement may be brought in any federal or state court located in the City and State of New York. By the execution of this Agreement, the Subsidiary Guarantor irrevocably submits to the non-exclusive jurisdiction of any such court (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any action, suit or proceeding in any such court or that such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
(c) The Subsidiary Guarantor hereby irrevocably designates, appoints and empowers [PROVIDE PROCESS AGENT,]as its authorized agent solely to receive for and on its behalf service of any summons, complaint or other legal process in any action, suit or proceeding IFC may bring in the State of New York in respect of this Agreement. The Subsidiary Guarantor also irrevocably consents[, if for any reason its authorized agent for service is not present in New York, New York,] to the service of process of summons, complaint and other legal process in any action, suit or proceeding being made out of federal and state courts located in the State of New York by mailing copies of the papers by registered United States air mail, postage prepaid, or by any other method of delivery specified in Section 7.01 (Notices), to the Subsidiary Guarantor at its address specified pursuant to such Section, whether within or without the jurisdiction of any court, and the Subsidiary Guarantor agrees that service of process on it as so specified shall be deemed effective service of process.
(d) The Subsidiary Guarantor hereby irrevocably waives any and all rights to a trial by jury in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated HEREBY.
(e) The Subsidiary Guarantor hereby explicitly and irrevocably waives any immunity it may have in respect of its obligations under this Agreement or any other Transaction Document to which it is a party, or its assets, under the laws of any jurisdiction, including laws purporting to grant sovereign immunity, to the fullest extent permitted now or in the future by the laws of such jurisdiction.
(f) The Subsidiary Guarantor hereby irrevocably waives, to the fullest extent now or in the future permitted under the laws of the jurisdiction in which the relevant court is located, the benefit of any provision of law requiring IFC in any action, suit or proceeding arising out of or in connection with this Agreement or any other Transaction Document to which the Subsidiary Guarantor is a party to post security for the costs of the Subsidiary Guarantor, or to post a bond or to take similar action.
7.06. Successors and Assigns. This Agreement binds and inures to the benefit of the respective successors and permitted assigns of the parties. The Subsidiary Guarantor may not assign or otherwise transfer all or any part of its rights or obligations under this Agreement,
Sch. 9 Page 11
voluntarily or involuntarily, whether by merger, consolidation, reorganization, dissolution, operation of law or any other manner, without the prior written consent of IFC. The benefit of this Agreement may be freely and unconditionally assigned, transferred or otherwise disposed of, in whole or in part, by IFC to any other Person. Any purported assignment or other transfer in violation of this Section shall be void.
7.07. Integration; Effectiveness. This writing is intended by the parties as a final expression of this Agreement, and is intended as a complete and exclusive statement of the terms of this Agreement. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, may be used to supplement or modify its terms. There are no conditions to the full effectiveness of this Agreement.
7.08. Amendment. Any amendment of any provision of this Agreement must be in writing and signed by the parties.
7.09. Counterparts. The parties may execute this Agreement in several counterparts, each of which is an original, and all of which together constitute one and the same agreement. The signatures of all the parties need not appear on the same counterpart, and delivery of an executed counterpart signature page by facsimile or other electronic means will constitute effective execution and delivery of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
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INTERNATIONAL FINANCE CORPORATION |
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Sch. 9 Page 13
SCHEDULE 10
FORM OF ANNUAL MONITORING REPORT
ENVIRONMENTAL AND SOCIAL PERFORMANCE
ANNUAL MONITORING REPORT (AMR)
MCañuelas
Argentina
#36533
REPORTING PERIOD: (month/year) through (month/year)
AMR COMPLETION DATE: (day/month/year)
Environment, Social and Governance Department
2121 Pennsylvania Avenue, NW
Washington, DC 20433 USA
www.ifc.org/enviro
Sch. 10 Page 1
AMR SECTION I
INTRODUCTION
IFCs Investment Agreement for the MCañuelas project requires the MCañuelas to prepare a comprehensive Annual Monitoring Report (AMR) on the environmental and social (E&S) performance of its facilities and operations. This document comprises IFCs preferred format for E&S performance reporting. The following template may be supplemented with annexes as appropriate to ensure all relevant information on project performance is reported.
Contents:
I. Introduction
II. Clients Representation Statement by Sponsor authorized representative
III. Summary of Key E&S Aspects during the Reporting Period
IV. Action Plan Status and Update
V. Performance Indicators
Sch. 10 Page 2
AMR SECTION II
Clients Representation Statement by authorized representative
I Name in my role of position and representing MCañuelas certify that
a) The Project is in compliance with all applicable E & S Requirements as described in the investment agreement/contract/.../, and all actions required to be undertaken pursuant to the Environmental and Social Action Plan (ESAP) and any subsequent supplemental action plans. (when applies: with the exception made for those that have been disclosed in Section VII (*) in this report).
b) In relation to the Project there are no:
· Circumstances or occurrences that have given or would give rise to violations of E &S and labor Laws or E &S and labor Claims;
· Social unrest, local population disruption or negative NGO campaigns or activities against the project.
· Material social or environmental risks or issues in relation to the Project other than those identified by the E&S Assessment and the Environmental and Social Review Summary.
· To the best of the Borrowers knowledge existing or threatened complaints, orders, directives, claims, citations or notices from any Authority due to E&S issues.
· Any written communication from any Person, concerning the Projects failure to comply with any matter covered by the Performance Standards;
· To the best of the Borrowers knowledge ongoing or threatened strikes, slowdowns or work stoppages by employees of the Borrower or any contractor or subcontractor with respect to the Project;
c) All information contained in this AMR is true, complete and accurate in all respects at the time of submission and no such document or material omitted any information the omission of which would have made such document or material misleading.
d) There have not been any new company activities (eg. expansions, construction works, etc) that could generate adverse environmental impacts, and there have been no new ESIA studies, audits, or E&S action plans conducted by or on behalf of MCañuelas, with respect to any Environmental or Social standards/regulation/ applicable to the Project that IFC has not been notified of
(*) Section VII is to include any such deviation/non compliance that the client must inform IFC of.
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Signature |
Date |
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AMR SECTION III
Summary of Key E&S Aspects during the Reporting Period
This section aims to identify the key E&S progress/activities/incidents during the Reporting period (include key issues for the Reporting Period e.g. non-compliances, significant incidents(2), social unrest, significant improvements/initiatives regarding E&S performance, etc.)
Project Status
Select the current status of the project and provide a brief description of the developments in relation to the project over the reporting period. For example, has construction been started or completed, has new equipment been installed, has production capacity increased, or is the investment in new projects considered?
o Design |
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o Construction |
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o Expansion |
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o Operation |
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o Closure |
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o Other (specify) |
IFCs Performance Standards Implementation
PS1: Assessment and Management of Environmental and Social Risks and Impacts:
Please incorporate the organizational chart for the Environmental, Social, Health & Safety and Quality Teams across all eight plants/operations.
Please describe how the organizational capacity and competency of the team has improved over the year.
What improvements has the team made to the Environmental and Social Management System of the company? Please identify and describe the changes and improvements.
How has this resulted in efficiencies in the way that MCanuelas manages its operations?
Please identify (and provide evidence of) any new policies, procedures or mechanisms adopted this year?
(2) Examples of significant incidents follow. Chemical and/or hydrocarbon materials spills; fire, explosion or unplanned releases, including during transportation; ecological damage/destruction; local population impact, complaint or protest; failure of emissions or effluent treatment; legal/administrative notice of violation; penalties, fines, or increase in pollution charges; negative media attention; chance cultural finds; labor unrest or disputes; local community concerns.
Sch. 10 Page 5
Has the team continued to receive ongoing training on ESHSQ matters relevant to the operations? Please highlight the main highlights of this training.
What international standards or requirements has MCanuelas sought/implemented/been certified against this year, and what is the status of each. Please identify and describe.
During the reporting period, are you aware of any events that may have caused damage; brought about injuries or fatalities or other health problems; attracted the attention of outside parties; affected project labor or adjacent populations; affected cultural property; or created liabilities for your company?
o Yes o No
Provide details
Describe any ongoing public consultation and disclosure, liaison with non-governmental organizations (NGOs), civil society, local communities or public relations efforts on environmental and social aspects.
PS2. Labor and Working Conditions
Provide the following information regarding your workforce:
Site Name |
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# of direct |
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# female direct |
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# employees |
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# employees |
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# Contractor |
(Plantas) |
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employees |
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employees |
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terminated |
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hired |
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employees(3) |
Spegazzini |
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Molinos |
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Etc. |
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Please provide a copy of the workplace grievances collected this year and how they have been closed and addressed.
Please describe the main highlights of MCanuelas relationship with its union during this past fiscal year, including a summary of the main agreements reached.
Please describe how MCanuelas has followed up on its suppliers and third parties obligation to comply with relevant elements of IFC PSs. Please describe how this has been achieved, and concrete examples of where and how MCanuelas has audited and evidenced this.
(3) Contractors performing core functions for the Company in the premises of the Company or in the name of the Company
Sch. 10 Page 6
Occupational Health and Safety
Describe the main changes implemented in terms of Occupational Health and Safety (OHS) during the reporting period, e.g. identification of hazards, substitution of chemicals, new controls, etc.
Please provide copy of risk/hazard identification and gap analysis for each site.
Please provide copy of OHS corrective action plans for each site
Please provide copy of MCanuelass most recent hazard exposure monitoring reports and applicable mitigation measures (noise, heat, dust and chemical exposure).
Please provide details of internal job inspections program for each site (frequency of inspections, total number of inspections, number of major findings and non-compliances, number of opened and completed corrective actions)
Occupational Health and Safety Indicators
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Reporting period- Previous |
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This reporting period |
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Year |
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Report Total numbers for each |
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Direct |
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Contractor |
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Direct |
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Contractor |
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parameter |
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employees |
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employees |
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employees |
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employees |
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Total number of Workers |
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Total man-hours worked - Annual |
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Total number of lost time occupational injuries |
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Total number of lost workdays due to injuries |
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Number of fatalities |
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Describe in detail fatalities and vehicle accidents, including corrective measures (provide copies of OHS investigation and respective corrective plan).
Work Environment Conditions
Please provide copies of any monitoring program that has been conducted to ensure safe and healthy work environment conditions. These may include: 1) noise levels, 2) vibrations, 3) ambient temperature, and 4) indoor air quality.
Sch. 10 Page 7
PS3. Resource Efficiency and Pollution Prevention
Provide the following environmental monitoring data for this reporting period. If you already have all the data requested available in another format, this can be submitted instead. Please provide a scaled facility map showing the precise locations of all monitoring points.
Air Emissions : Boilers
For each site, complete the table below to provide IFC with quantitative data on MCañuelas facilities air emission (list stationary sources) and ambient air quality levels (use maps to show locations of air quality monitoring stations). Please provide host-country standards, for each air pollutant, in host-country units in the table below.
Air Eraissions: Stationary Source Point(1)
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MCañuelas |
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Argentine |
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WBG/IFC Reference |
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Performance |
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Maximum |
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Combustion |
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Levels |
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Permissible Levels |
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Performance |
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Technology/Fuel |
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Units) |
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(Argentine Units) (2) |
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Boilers |
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Solid |
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Particulate Matter (PM) |
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50 |
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mg/Nm(3) |
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mg/Nm(3) |
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Sulfur Dioxide (SO2) |
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2000 |
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mg/Nm(3) |
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mg/Nm(3) |
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Nitorgen Oxides (NOx) |
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650 |
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mg/Nm(3) |
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mg/Nm(3) |
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Liquid |
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Particulate Matter (PM) |
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50 |
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mg/Nm(3) |
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mg/Nm(3) |
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Sulfur Dioxide (SO2) |
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2000 |
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mg/Nm(3) |
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mg/Nm(3) |
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Nitorgen Oxides (NOx) |
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460 |
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mg/Nm(3) |
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mg/Nm(3) |
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Sch. 10 Page 8
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MCañuelas |
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Argentine |
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WBG/IFC Reference |
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Performance |
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Maximum |
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MCañuelas |
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Combustion |
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Levels |
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(WBG/IFC |
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Permissible Levels |
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Performance |
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Technology/Fuel |
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(WBG/IFC Units) |
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Units) |
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(Argentine Units)(2) |
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(Argentine Units)(2) |
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Notes: -N/A/ - no emissions guideline; more stringent performance levels than these in the Table should be applicable to facilities located in urban / industrial areas with degraded airsheds or close to ecologically sensitive areas where more efficient emissions controls may be needed.; MWth is heat input on HHV basis; Solid fuels include biomass; Nm3 is at one atmosphere pressure, 0°C; MWth category is to apply to the entire facility consisting of multiple units that are reasonably considered to be emitted from a common stack except for NOx and PM limits for turbines and boilers. Guidelines values apply to facilities operating more than 500 hours per year with an annual capacity utilization factor of more than 30 percent.
(1) Provide a scaled facility map showing the precise location of all air emission sources.
(2) Report country standards only if the host country regulations/standards are more stringent than the World Bank Group EHS guidelines. Projects are expected to achieve whichever that is more stringent.
(3) 50 or up to 100 if justified by project specific considerations (e.g. Economic feasibility of using lower ash content fuel, or adding secondary treatment to meet 50, and available environmental capacity of the site.
(4) 1.5 percent Sulfur or up to 3.0 percent Sulfur if justified by project specific considerations (e.g. Economic feasibility of using lower S content fuel, or adding secondary treatment to meet levels of using 1.5 percent Sulfur, and available environmental capacity of the site)
(5) 0.5 percent Sulfur or lower percent Sulfur (e.g. 0.2 percent Sulfur) if commercially available without Significant excess fuel cost
Ambient Air Quality
Air pollutants to be monitored as part of an ambient air quality monitoring program include those in Table 1.1.1 - WHO Ambient Air Quality Guidelines (See World Bank Groups General Environmental, Health and Safety [EHS]).
Table 1.1.1: WHO Ambient Air Quality Guidelines
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Averaging Period |
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Guideline Value (µg/m3) |
Sulfur Dioxide (S02) |
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24-hour |
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125 (interim target 1) |
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50 (interim target 2) |
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20 (guideline) |
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10 minute |
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500 (guideline) |
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Nitrogen Dioxide (N02) |
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1 -year |
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40 (guideline) |
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1-hour |
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200 (guideline) |
Sch. 10 Page 9
Particulate Matter (PM10) |
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1-year |
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70 (interim target 1) |
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50 (interim target 2) |
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30 (interim target 3) |
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20 (guideline) |
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24-hour |
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150 (interim target 1) |
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100 (interim target 2) |
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75 (interim target 3) |
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50 (guideline) |
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Particulate Matter (PM2.5) |
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1-year |
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35 (interim target 1) |
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25 (interim target 2) |
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15 (interim target 3) |
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10 (guideline) |
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24-hour |
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75 (interim target 1) |
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50 (interim target 2) |
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37.5 (interim target 3) |
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25 (guideline) |
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Ozone (O3) |
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8-hour daily maximum |
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160 (target 1) |
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100 (guideline) |
See WBG General EHS Guidelines for footnotes and additional information/
Wastewater Quality:
For each facility, please provide copies of MCañuelass treated wastewater quality monitoring reports. Indicate if there are exceedances of host-country standards and/or IFC guideline values.
Water Resource Quality:
For each facility, if treated effluent is discharged to a surface water body, please provide copies of surface water quality of the receiving water body.
For those facilities that obtain water from groundwater supply wells, please provide copies of groundwater quality monitoring reports. Also present monitoring data regarding monthly/annual water consumption and information on groundwater static and dynamic levels.
Sch. 10 Page 10
Solid wastes:
For each facility, please provide copies of MCañuelass solid waste monitoring reports, describing the volumes of the various waste types (e.g., hazardous, domestic, recyclable, batteries, light bulbs, etc.) Please provide manifests that demonstrate that wastes are disposed at authorized/licensed facilities.
PS4 - Community Health, Safety and Security
Using the table below list and briefly describe any new initiatives implemented in relation to community health and safety during the reporting period. Include risk assessments, new infrastructure and equipment; hazardous materials and safety management, transportation and exposure to disease.
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Planned future |
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efforts? |
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During the reporting period any emergency drills have been conducted with community participation? Are the communities aware of the emergency response plans? This is particularly important at the two facilities (Cañuelas and Spegazzini) where are there refrigeration systems that use ammonia.
Please describe any changes in the Companys engagement with private/public security forces during the reporting period and any corresponding agreements, if any.
Stakeholder Engagement
Please describe the nature and scope of engagement with local communities and external stakeholders (institutional, etc.) during the past year.
What procedures do MCanuelas apply when engaging with project stakeholders? Please describe in detail and provide evidence as an Annex.
Using the Table provided below list any grievance or dispute (include court action) regarding land acquisition or resettlement received during the reporting period, describe how it was addressed and its current status.
Sch. 10 Page 11
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closed |
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Sch. 10 Page 12
AMR SECTION V
Action Plan Status and Update
Please update us in the current status of the action plan, define the dates when pending actions will be implemented. Please refer to the initial ESAP for the indicators and deliverables, but also include additional required actions from past supervision activities.
Environmental and Social Action Plan (ESAP) Status Report
(Client updates this report annually)
Project Name: |
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MCañuelas |
Project ED: |
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36533 |
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Team Name: |
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CMGA7 |
Region: |
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Latin America and the Caribbean |
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Country: |
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Argentina |
Sector: |
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FA-AA Grain Processing |
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Lead Environmental Specialist (LESS): |
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Paola Castillo |
Support / Proxy Member: |
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Cleone Bothelho |
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Anticipated |
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Task |
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Completion |
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Indicator of |
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Completion |
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Status as of |
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Title/Description |
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Date |
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Completion* |
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Date* |
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DD/MM/YYYY |
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Complete |
Cañuelas will conduct in-depth audits to verify the conditions of all systems and equipment (e.g. electrical systems, surface drainage system around areas that store chemicals and fuels, boilers, chemical storage tanks, fire protection pumps, etc.) at older facilities and will develop action plans to improve conditions or upgrade systems and equipment in a phased manner, following a hierarchical mitigation strategy based on prioritization of issues. |
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6/30/2016 |
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Sch. 10 Page 13
Cañuelas will conduct evaluations of indoor air quality, and, as needed, improve existing air emission controls and its air quality monitoring program for the protection of workers health. |
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8/31/2017 |
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The Company will develop detailed water balances for each plant. Following the assessment of the water balance, Cañuelas will develop long-term plans for water efficiency and reduction of consumption. |
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4/30/2018 |
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* to be reported once the action item has been finalized and % of completion is 100%.
Sch. 10 Page 14
AMR SECTION VI
Performance indicators
Please Provide the Following Performance Indicators.
Total Energy production and total energy exported to the grid
Total Annual fuel Consumption (specify the type of fuel used and corresponding annual volumes)
Total energy purchased from the grid.
Sch. 10 Page 15
SCHEDULE 11
FORM OF ACTION PLAN
Environmental and Social Action Plan
No. |
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ESAP CONDITION |
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ESTIMATED TIMEFRAME |
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1 |
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Cañuelas will carry out a gap analysis to compare, assess and identify differences, including areas for improvement between the environmental and social conditions and performance at each new plant against local environmental and social laws, and the relevant IFC PS requirements. |
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October 2016 |
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Cañuelas will prepare an action plan (AP) establishing the corrective measures that will be implemented to close the gap and align curren practices with IFC PS requirements. The AP wil include an implementation schedule, resource allocation and budget, which IFC will use to monitor and supervise progress and improved performance during, its supervision visits. |
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December 2016 |
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3 |
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Cañuelas will conduct in-depth audits to verify the conditions of all systems and equipment (e.g. electrical systems, surface drainage system around areas that store chemicals and fuels, boilers, chemical storage tanks, fire protection pumps, etc.) at older facilities and will develop action plans to improve conditions or upgrade systems and equipment in a phased manner, following a hierarchical mitigation strategy based on prioritization of issues. |
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Due date of initial audits:
April 2016
Due date of (commencement of implementation of) action plans:
June 2016 |
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4 |
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Cañuelas will conduct evaluations of indoor air quality, and, as needed, improve existing air emission controls and its air quality monitoring program for the protection of workers health. |
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Due date for initial action plan:
March 2016
Due date for start of monitoring program:
August 2017 |
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5 |
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The Company will develop detailed water balances for each plant. Following the assessment of the water balance, Cañuelas will develop long-term plans for water efficiency and reduction of consumption. |
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Due date of initial action plan:
April 2016
Due date for completion of long term plans:
April 2018 |
Sch. 11 Page 1
6 |
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Improve conditions of secondary tanks and surface drainage systems, and improve maintenance of all pollution prevention measures, controls and technologies to ensure proper operation and full alignment with requirements of IFC PS3. |
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April 2018 |
Sch. 11 Page 2
Exhibit 21.1
Subsidiaries of the Company
Name |
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Country of Incorporation |
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Doing Business As |
Alimentos Cañuelas Chile S.P.A. |
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Chile |
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Alimentos Cañuelas Chile |
Cañuelas Chile S.P.A. |
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Chile |
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Cañuelas Chile |
Cañuelas S.A. |
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Uruguay |
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Cañuelas |
Empresa de Alimentos Cañuelas S.R.L. |
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Bolivia |
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Empresa de Alimentos Cañuelas |
Empresa de Servicios MOLCA S.R.L. |
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Bolivia |
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Empresa de Servicios MOLCA |
Finexcor S.R.L. |
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Argentina |
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Finexcor |
Meats S.R.L. |
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Argentina |
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Meats |
Megaseed SA |
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Argentina |
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Megaseed |
Moinho Canuelas S.A. |
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Brazil |
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Moinho Canuelas |
Molino Cañuelas S.A. |
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Uruguay |
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Molino Cañuelas |
Molino Americano S.A. |
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Argentina |
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Molino Americano |
Molinos Florencia S.A. |
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Argentina |
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Molinos Florencia |
Molinos Puntanos S.A. |
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Argentina |
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Molinos Puntanos |
Molisur S.A. |
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Argentina |
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Molisur |
Southern Multinvest S.R.L. |
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Argentina |
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Southern Multinvest |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form F-1 of Molino Cañuelas S.A.C.I.F.I.A. of our report dated March 27, 2017, except with respect to our opinion on the consolidated combined financial statements insofar as it relates to the acquisition of the packaging business of Cañuelas Pack S.A. described in Note 1.2 as to which the date is April 1, 2017, relating to the financial statements of Molino Cañuelas S.A.C.I.F.I.A., which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" and "Selected Consolidated Combined Financial Data" in such Registration Statement.
Price Waterhouse & Co. S.R.L.
/s/ MARCELO DE NICOLA |
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Marcelo de Nicola Partner |
Buenos Aires, Argentina
March 27, 2017
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