Argentine agri-input supplier Agrofina to default on debt

Another major agricultural business group in Argentina has announced its inability to meet debt obligations and stock market promissory notes, according to the country's National Securities Commission (CNV). 

This time, it's Los Grobo Group and its input distribution company Agrofina, both led by the Grobocopatel family.

Los Grobo Agropecuaria SA informed the CNV it couldn't make a US$100,000 debt note payment on the Argentine Stock Exchange. The company cited "increasing market illiquidity for agricultural issuers' notes, combined with uncollectible credits and financial difficulties of an affiliated company" as reasons for the default.

The company also announced it would suspend payments on remaining promissory notes due through March 31, 2025, totaling at least $10 million. In July 2024, rating agency FIX SCR had already downgraded Los Grobo Agropecuaria, citing "major challenges in improving results and cash flows due to lower commodity prices, exchange rate appreciation, and normalized interest rates."

Agrofina, an agrochemical manufacturer affiliated with Los Grobo Group, defaulted on a 400-million-peso note (approximately $400,000). The group attributed this to falling agrochemical demand that "compromised cash flow for both manufacturers and distributors."

The default extends to Agrofina's stock exchange notes and the upcoming interest payment and first capital amortization of Class XII Negotiable Obligations (ON) that were due on December 30, 2024. This amounts to $9.38 million in principal and $4.62 million in interest.

Agrofina's board stated they are "committed to resolving this situation by taking all necessary measures" and that the company is "conducting a general evaluation of remaining instruments to find a comprehensive solution ensuring normal operations."

Agrofina's latest financial statement to CNV showed warning signs, with a 5.591 billion peso loss in the quarter ending September 30, 2024, and indications that the company was seeking "potential new investors interested in the agricultural sector" for capitalization.

Economist David Miazzo explained that agricultural activity faces complicated profitability due to various factors, including export taxes (Las Retenciones), low exchange rates, and commodity prices.

According to Miazzo, these companies operate with debt-leveraged business models, which he considers "atypical in the agricultural sector." "They grew with financial capital (external) and little of their own, but this carries risk. Any disruption creates what we are seeing now. The agricultural sector typically operates with its own capital and leverages against potential benefits," he said.

Miazzo, owner of Data Miazzo analytics firm, suggested that Los Grobo and Agrofina's situation reflected a contagion effect from what initially happened with Surcos, suffering from a "temporary liquidity shortage" in sector credits. "The agricultural sector will be viewed with extra scrutiny. Investors see risk in the sector," he said in conclusion.

(Editing by Leonardo Gottems, reporter for AgroPages)