After Accounting Crisis, China’s COFCO Overhauls Brazil Business: Reuters

As the Chinese food commodities trader COFCO restructures its Nidera Sementes Ltda business following accounting irregularities reported last year, it is overhauling its operations in Brazil, including a management reshuffle, reported Reuters quoting company documents and sources.

Including a $200 million in unauthorized trading losses on its biofuels desk and a $150 million financial hole in its Latin American operations, COFCO has had several setbacks since first investing in Dutch-based trader Nidera in 2014.

This year COFCO completed its takeover of Nidera.

The resignation of three top Nidera Sementes executives in Brazil this year is reported by Reuters based on company documents and interviews with industry sources. Valued at 130 million reais ($40 million), the firm is also spinning off its ports unit known as Cereal Sul – Terminal Marítimo SA.

Job cuts as part of COFCO’s integration of Nidera in Brazil was confirmed by a source with direct knowledge. The cuts affected less than 1 percent of COFCO’S workforce, currently 8,400 people.

There were no comments from a COFCO media representative.

A full-year loss of $266.6 million in 2016 versus a loss of $65.9 million in the 15 months ended in December 2015 was recorded by Nidera Capital BV – Nidera’s holding company owned by COFCO, in an annual company filing.

Thinning margins due to a global grain glut have resulted in the profitability for the world’s biggest agricultural players including U.S. agri-business group Archer Daniels Midland Co and rivals such as Bunge Ltd.

COFCO in recent months has tried to integrate the units into a cohesive structure after investing over $3 billion to buy Noble Group of Singapore’s agri-business and Nidera. assets in some of the world’s top grain, vegetable oil, sugar and coffee-producing regions were given to the Chinese company by the acquisitions.

Brazil, a vital provider of commodities to world markets and among its biggest activities in South America, is included in COFCO’s efforts to consolidate its legacy empire.

At the same time that the top three decision-makers for the country resigned, at least eight directors were appointed in Brazil, reported Reuters.

Nidera’s previous executive director in Brazil- Marina Alves de Souza is now chief executive.

Ranging from grains origination to logistics to tax and risk and strategy were affected by the reshuffle.

Subject to approval by regulators and Nidera Sementes’ creditors, the ports unit would be absorbed by Nidera Portos Participações Ltda, a logistics subsidiary, reported Reuters citing information from minutes from a February shareholders’ meeting.

Another terminal called T12A would also be kept within the COFCO group for the export of grains, apart from the Cereal Sul port unit, sources also said. Capacity to handle almost 6 million tonnes of grains is available with the terminals.

A significant overstatement of prepaid expenses and mark-to-market measurements of forward contracts between 2014 and 2015 are the issues that are related to the accounting issues in Brazil. The company recognized a $54.8 million impact on equity in each of the years when the inconsistencies were found, according to Nidera Capital BV’s 2016 financial statement.

(Adapted from Reuters)

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