BRAZIL: RenovaBio should prompt new wave of M&A in sugarcane sector
Published: 11/10/2017, 2:15:01 PM
Brazil's sugarcane industry is expected to go through an intense wave of mergers and acquisitions (M&A) once RenovaBio, a governmental program to encourage use of biofuels in the country, is launched, says Alexandre Figliolino, partner at MB Agro consultancy firm, according to Brazil's Infomoney news website.
"If RenovaBio comes through, I have no doubt that we will have a consolidation movement in the sugar and ethanol sector as we have never seen before," said Figliolino, during this week's XP Datagro's Agrifinance Brazil conference.
RenovaBio aims to expand biofuel production in Brazil by adopting predictable rules for development of the sector, in line with economic, social and environmental sustainability. The program also aims to contribute to Brazil's goals to reduce greenhouse gas emissions.
According to Figliolino, the sugarcane industry is experiencing five years of stagnation, and has a "huge disparity" in terms of operational efficiency of mills, opening up a scenario in which the most efficient tend to acquire others.
Currently, there is a process of "silent consolidation" in the sector, according to Figliolino, in which small acquisitions are occurring with mills taking over cane fields of neighboring producers.
Guilherme Nastari, director at Datagro consultancy firm, says RenovaBio's approval may be the trigger for the next big wave of production in the industry.
Felipe Vicchiato, financial director of São Martinho mill, said RenovaBio's launch may also encourage more companies in the industry to seek initial public offerings (IPO).