(Photo: The chairman of Tomás Hnos. & Cía, Carlos Borla, during a field day in Carlos Casares)
By Javier Preciado Patiño
Buenos Aires, June 25th. Placed at the northwest of the Buenos Aires province, Tomás Hnos. & Cía is not only one of the largest agricultural retail company in the region but also a relevant farming company, which also provides storage and grain handling for farmers.
The company was born 120 years ago, by the hand of Spanish immigrants in Carlos Casares city. In the ’80 the company began a deep transformation, thanks to the leadership of Carlos Borla, currently its CEO and majority shareholder.
He was able to convert a traditional ag dealer and storage house in a modern “multi-services” company which earns US$300 million per year, which has a 250K tons grain storage capacity and which plants 30K hectares of cash crops.
Borla talked with eFarmNewsAr from his headquarters in Carlos Casares. The company expanded its influence zone to main “quarters” (a usual term in the local farming slang) in the region like Gral. Villegas and Trenque Lauquen in the West, Bragado in the East, Bolivar in the South and Lincoln in the North. In the last five years, the storage capacity was raised from 150,000 to the current 250,000 tons, and new commercials offices were open in the region.
Borla describes the company based over three equal and non-dissociable legs: farming, storage, and inputs. “Around 60% of our farming is made in association with farmers, and the other 40% consists of the classical rent-land agriculture, where we take the farm and run the operation. Meanwhile, we are handling 1.2 million metric tons of grains this year, and selling inputs for US$55 million”, the leader of Tomás Hnos. starts to explain.
This strategy is the response to the fierce competition that classic storage houses have been facing in the last twenty years. On one hand, large grain trading houses try to close business directly with large farmers, i.e., bypassing the storage companies. On the other hand, the chemicals and seeds companies had living an increasing consolidation process, and they also trying to close business directly with farmers.
“There are some suppliers that created its own distribution channel, but there are others that need our channel to reach the farmers”, Borla explains. “Our challenge is how to add value to both sides”.
The distribution channel had been shocked by the largest mergers and acquisitions between manufacturers like DuPont – Dow, Bayer – Monsanto, Syngenta – Nidera – ChemChina, etc. To try not to be swept, then to survive and grow if it’s possible is the goal for the main retail companies in this game.
“We decided that Tomás Hnos did not go to be a poor company with rich shareholders, and then we reinvested the profits in the company to have a strong financial position”, Borla says. “This brought us huge benefits. We access to better financial conditions for our operation because part of the capital is own. You know that banks use to lend money to those who have money”, Borla says ironically.
For example, the farming operation is financed with their own labor capital and 50% of the new storage facilities built in the last years was financed also with their own money. In a country where interest rates around 70% annual, the inflation don’t descend from 50% and country risk around 800 points, to count with proper labor capital represents a strong advantage. “Thanks to our solid financial position, we can access to interest rates (in dollars) four or five percentual points below the market line”, Borla stresses. “Also we were able to leave out to go the capital markets to launch negotiable bonds or to set up trust funds, and take money with an interest rate below the average”.
A key point in this game is the triangle formed by the dealer, the farmer, and the supplier. As we said, if chemical or seed companies can bypass the dealer, they do it. Large companies have teams to work directly with large farmers or farming companies. Each knows each other and companies know about the paying capacity of their customers. But when suppliers want to reach the medium or small farmer, the retail channel takes importance.
Unlike the fertilizers operation, where sales are commonly paid cash, farmers ask for credit for buying seeds and chemicals. In the last years, the term of the credit was extended to 270 days or more. Clearly, is not so easy to finance these terms, and to have a precise knowledge of the customer is highly necessary. Tomás Hnos. & Cía has taken advantage in this play, that constitutes one of his main assets.
Also, its large storage capacity is a key tool to compete in the business. “Is not ever easy for the farmer, to harvest the crop, that the grain is inside the tolerance range (humidity), to charge the trucks and to unload the grain in exporter’s port facilities. Usually, they need our services to hand the grain and storage it, and in this way, we enter in the business too”, Borla says in dialogue with eFarmNewsAr.com.
Borla also opines that retails channel is not so consolidated like other countries, but he thinks that this process sooner or later will occur in Argentina. The focus in “services” that add value to both farmers as suppliers and a strong presence in the region are two tools for facing these hard times.
Tomás Hnos. & Cía at a glance:
Incomes: US$300 million
Storage capacity: 250K tons
Inputs sales income: US$55 million
Farming: 30K hectares