International Finance Corporation (IFC) has invested a quasi-equity investment of $8 million in Vietnam-based Nafoods Group to enable the company to expand its fruit processing capacity, boost exports and grow the new fruit seedling business.
The $8-million financing is in the form of redeemable convertible preference shares. It is part of a $28.2-million package that also includes internally generated cash and equity/bank borrowings that IFC had proposed earlier, DEALSTREETASIA reported in January this year.
The investment will fund the expansion of Nafoods Group’s processing factory in Long An province, south of Vietnam, and the construction of a packing house in the country’s Central Highlands, as well as the development of new fruit seedlings business.
Ho Chi Minh City Stock Exchange-listed Nafoods is a niche fruit processor and exporter with a leading position in passion fruit, IFC said. The company sources more than 13,300 tonnes of fresh and processed fruits annually from various regions in Vietnam.
“IFC’s long-term funding and technical advice could not be more timely as we are trying to develop higher value for our products by adopting safe and sustainable practices and by improving our production facilities,” said Nguyen Manh Hung, Nafoods chairman.
As a result of the investment, Nafoods expects to increase the number of farmers along its supply chain by 11,500 and to implement a globally standardised food safety management system.
Historically known as an agriculture country, this sector in Vietnam accounted for 16 per cent of its GDP and 17 per cent of export revenues. Key agricultural exports such as fruits and vegetables have grown rapidly over the past five years, but the bulk of the produce in Vietnam is still exported in fresh form and at less competitive prices due to lower quality, according to IFC.
“As Vietnam seeks to increase economic competitiveness and access to international markets, developing a high value-added and export-oriented agribusiness sector will help unlock the industry’s full potential,” commented Kyle Kelhofer, IFC country manager for Vietnam, Cambodia, and Lao PDR.
Over the next 18 months, IFC will also work with Nafoods’ fruit farmers and suppliers in Vietnam, Cambodia, and Lao to help them conform to global sustainable farming standards and practices, in partnership with New Zealand and the Slovak Republic. In Vietnam, the project will be implemented as a pilot for about 1,000 farmers on 3,000 hectares of land for producing passion fruit, dragon fruit, and coconut.