July 20, 2018 / 7:00 PM / a year ago

Brazil grain startup seeks international strategic partner: CEO

SAO PAULO (Reuters) - Grain trader Lotus Grains & Oilseeds wants to sell a minority stake to a strategic partner, a company executive said on Friday, as the Brazilian firm ramps up operations in one of the world’s largest commodities producing nations.

Thiago Piccinin, CEO of Lotus Grains & Oilseeds, attends an interview with Reuters in Sao Paulo, Brazil July 20, 2018. REUTERS/Ana Mano

Privately owned Lotus, a small “asset-light” firm which does not own any warehouses or port facilities, is more of a service provider seeking to grow in a niche market, founder and Chief Executive Thiago Piccinin said in a interview.

Founded in 2017, Lotus originated, or bought from farmers, about 30,000 tonnes of soybeans so far this year. It aims to expand that to an annual amount of 4 million tonnes of grains, including corn, in six years’ time.

The executive, who had worked for Nidera and Archer Daniels Midland (ADM.N), spent two weeks in China in October speaking with prospective partners. He hopes to close a deal in 2019, after the company’s first year in full operation.

Piccinin declined to name them as talks were non-binding and confidential. He said the potential investor will be a trading company, which normally owns processing plants, and could be based in Europe or Asia.

“We want to operate where the large trading companies don’t,” Piccinin said.

A strategic partner will potentially increase the volume of trades for Lotus, as grain handlers do a lot of business among them. It would also show the market “we have demand” for the soybeans the firm will originate, he added.

Piccinin said all of the soy Lotus has bought this year was sold in the domestic market, where soy crushing margins became attractive after a drought caused crop failure in Argentina, disrupting processing in the world’s largest soymeal exporter.

Lotus’ focus is on buying small quantities of soybeans and corn. The plan consists of increasing margins by taking advantage of a slim operating structure. “The larger the (grain) lot the higher the cost,” the executive said.

Operating in a niche market marks an industry shift from a model based on bulk quantities at a time when traditional grain handlers are struggling to recover margins following years of bumper crops.

Piccinin said an asset-heavy structure means the cost of originating grains is $6 to $7 per tonne of soybeans for these companies, whereas Lotus’ aims at keeping it at $1 per tonne.

The company projects gross $1.2 billion of gross revenue when it achieves 4 million tonnes of trading capacity, the executive said.

Reporting by Ana Mano and Roberto Samora; Editing by Richard Chang

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