MEXICO CITY - Mexican business magnate Alfonso Romo made big bets in the 1990s on agrobiotechnology, but his investment in seeds -- both genetically engineered and conventional -- has sprouted into a mountain of debts for his conglomerate Savia , analysts said on Monday.
Savia is selling off divisions and negotiating with creditor banks to restructure its debt totaling $1.15 billion, after a payments crisis due partly to heavy investment in the conglomerate's unprofitable Seminis Inc., the biggest seed company in the world.
Savia, based in the industrial city of Monterrey in northern Mexico, recently sold off its packaging subsidiary Empaques Ponderosa for $285 million, and could soon announce the sale of its remaining stake in Mexico's largest insurer Seguros Comercial America (Segcoam)
"Really the company is in a very difficult situation. Its agro-biotechnology division has been very affected by the lower international demand for transgenic seeds," Miguel Gaytan, an analyst with Bursametrica Management, told Reuters.
"Basically that means the company has not generated the earnings to be able to make debt payments," he said.
But analysts said Savia's liquidity problems are not only because of the lack of demand for seeds, but also because of the way Romo piled on debt over the last 10 years to invest in a business that needs a long time to mature.
CALIFORNIA SEEDS
In 1994 Romo, chairman and CEO of Savia, founded Seminis in California.
He went on to spend millions snapping up companies in Korea, India, the United States and Brazil, turning Seminis into the largest developer, producer and marketer of vegetable seeds in the world.
While the great majority of Seminis's sales still come from conventional seeds, the company aims at becoming a giant in the biotech field -- developing seedless watermelons, tomatoes that take a long time to rot on the shelf, fruits with higher crop yields and resistant to pests.
Savia has another California company, Bionova Holding, which grows tomatoes and peppers, distributes produce and genetically engineers fruit and vegetable seeds.
When Romo, who was among 13 Mexican billionaires on Forbes magazine's list of the world's wealthiest people last year, took Seminis public in the late 1990s, analysts warned that biotechnology was extremely capital intensive and risky because of the controversy connected to genetically altered products.
"What Alfonso Romo sought to accomplish with these acquisitions was to put together a group with high growth potential. However, the financing was mostly through debt," said Federico Mora, an analyst with Standard & Poor's Mexico.
Mora said the businesses Romo bought did not grow as fast as the time frame for interest and debt payments.
Bionova and Seminis together account for 19 percent of Savia's revenues. But both saw a drop in sales, and negative operating profit last year.
In 2000 Seminis sales dropped 13 percent to $481 million, due to contraction in the North American fruit and vegetable seed market, depreciation of the Euro against the U.S. dollar, and divestiture of non-core assets. Seminis had an operating loss of $39 million in 2000. Its debt is about $350 million, analysts said.
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