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KKO plans listing, in drive to rank top in Ivory Coast cocoa

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KKO International unveiled an international public offering, heralding the rare listing of a cocoa producing company, and aimed at raising cash for a drive to become the top cocoa producer in Ivoty Coast.

KKO, which operates through its subsidiary Solea, said that it aimed to raise E10.0m from its share flotation, scheduled for next month, on the French and Belgian Alternext markets.

The cash will go towards realising an ambition to turn Solea into "the largest cocoa plantation in Ivory Coast", the top producing country in the $12bn market for the bean.

The move comes amid a trend toward large-scale plantation agriculture in a cocoa sector traditionally dominated by smallholders.

Solea aims for top rank in Ivory Coast by expanding its area from 1,000 hectares, which 800 hectares are under cultivation, and is aiming to cultivate 3,000 hectares by the end of 2017.

Solea is currently unprofitable, but is aiming to break even on running costs after harvesting begins.

Industry shake-up

Data from the International Cocoa Organisation in 2007 found that 95% of the world's production came from farms of below 3 hectares in size, while larger farms in South America range up to 100 hectares.Array

Initial offering: E10m

(to be increased to a maximum of E11,499,998.82 in the event of exercise of the Extension Option and a maximum of E13,224,998.48 in the event of exercise of the Over- Allotment Option)

Price Range: between E3.26 and E3.98 per share

Listing: Altenerext Brussels and Alternext Paris

Subscription period: September 16 to October 8 2015 (inclusive)

Use of proceeds:

Land acquisition: E5.85m, i.e. E2.35m over the next 12 months, E2.5m in the following 12 months and E1m thereafter.

Staff and equipment: E3.04m, i.e. E1.53m over the next 12 months, E0.81m in the following 12 months and E0.7m thereafter

Structural investments: E0.58m, i.e. E0.38m over the next 12 months, 0.1m in the following 12 months and another 0.1m thereafter.

But a number of large developments are under way, which could drastically change the industry.

In June, United Cacao announced that it is on track to plant 2,000 hectares of cocoa trees in Peru this year, with a long term target of over 5,000 hectares.

According to United Cacao, this would making it the world's biggest cocoa grower by area.

And Tropical Farms Limited, which is owned by London-listed agriculture company Agriterra, is in the process of developing a 3,200 hectare plantation in Sierra Leone.

Tropical Farms Limited aims to plant a total of 4,000 hectares by 2017.

Rising yields

As well as being much larger than the traditional cocoa farm, these new players are looking to maximise yields with a move away from traditional agronomy.

Traditionally, West African growers can hope for around 0.5 tonnes of cocoa beans a hectare, while United Cacao hopes that in Peru yields could reach 2.5 tonnes a hectare.

Solea is even more ambitious, with a yield target of 5.0 tonnes a hectare, thanks to the use of new tree stock, developed by the Ivory Coast National Agriculture Research Centre.

Shorter production times

The company claims the cultivar offers "high average yields with a production timeframe shortened to 18 months from planting time.

"Cultivation of the cocoa bean is perceived as a complex process that still essentially calls on traditional techniques and is restricted to certain climates," said KKO, but added that it believes it can change that perception.

Solea's plantation is equipped with micro-irrigation and fertiliser distribution mechanism.

"This, alongside procedures to monitor tree health and reinforce maintenance, will make it possible to produce beans of a consistent quality throughout the year," the company said.


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