(Updates with analyst’s comments in fourth paragraph)
Oct. 24 (Bloomberg) -- Vanguarda Agro SA, a Brazilian biodiesel producer that’s shifting its focus to agriculture, agreed to sell two plants in the southern state of Rio Grande do Sul to a rival that’s expanding its fuel operations.
Camera Agroalimentos SA will pay about 58 million reais ($33 million) for a biodiesel refinery in Rosario do Sul and a vegetable-oil extraction plant, Nova Mutum-based Vanguarda Agro said today in a filing.
The agreement is part of a strategic shift for Vanguarda, which said last month that a surplus of biodiesel is driving down profits and it plans to acquire agriculture companies.
“Biodiesel is no longer the principal focus of the company,” Cesar Camilo, an analyst at Sao Paulo-based brokerage firm Sociedade Corretora Paulista - SOCOPA, said today in a telephone interview.
Diesel in Brazil is selling for 2.03 reais a liter at the pump. That’s about 15 percent below biodiesel prices at a government-organized auction for supply contracts in August, according to information compiled by Bloomberg.
Brazil requires that all standard diesel sold at the pump includes a 5 percent blend of the renewable fuel, and Camilo said the biodiesel industry wouldn’t be profitable without government support.
Vanguarda said the Rosario do Sul plant is not producing fuel now after it didn’t receive any contracts in August, in the last government-organized auction for supply deals.
It won contracts to deliver 25.5 million liters (6.73 million gallons) of biodiesel in the prior auction in May, according to fuel regulator Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis.
The company said in the filing that selling the plant is in line with its strategy to “sell idle assets and improve its capital structure.” The sale is expected to close within 30 days. Camera will make an initial payment of 12 million reais and the remainder over three years.
Vanguarda was previously known as Brasil Ecodiesel Industria e Comercio de Biocombustiveis e Oleos Vegetais SA. It changed its name after it acquired closely held agribusiness Vanguarda do Brasil SA last month.
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