S/C Financing – LPG/Propane Distributor

Deal Summary

Product Line: International Supply Chain P/N and A/R Lines
Funding Line Amount: $1.5 million
Company Type: GLP/Propane Distribution
Industry Type: Oil & Gas
Annual Revenue: $28 million
Location: Mexico

Mexico is an important market for the oil & gas industry, ranking 6th in global market demand for fuel. Its fuel consumption is expected to grow approximately 3% per year, which is twice the rate of global demand growth and more than that of the top 5 fuel-consuming countries. If demand continues to grow, there will most likely be an increased reliance on imports. Fuel is a seasonal business with the greatest demand for product occurring during the winter months (Q4 being the largest sales period). Our client, an LPG/propane retailer, distributes its product through trucks and service stations in major cities across Mexico.

Challenge

In 2016, Mexico deregulated prices for petroleum products. This essentially ended a monopoly and allowed other companies to compete on price, providing them with significant marketing opportunities. Deregulation has allowed our client to sell its product at better prices and take advantage of offers from international suppliers. However, the Mexican GLP/propane market is now highly competitive, with emerging entrants. As such, our client needs to spend more on its marketing efforts to stand out from the competition. It also needs to increase its purchasing capacity with suppliers that are more competitively priced in order to improve profitability.

Solution

The company is profitable with an agile operating and cash cycle. It has a strong credit report, good equity level, solid payment history with suppliers and is fully insured. It has taken advantage of deregulation by increasing its presence in Mexico through the opening of new service stations and the leasing of more trucks, which has ultimately increased its sales. Based on the the company’s solid performance and smart marketing tactics, coupled with the growing demand for its products, ExpoCredit felt confident approving the company’s request for up to $1.5M in supply chain funding.

Benefit

Thanks to ExpoCredit’s support of this successful company, it now has the additional resources necessary to build a competitive presence in the Mexican LPG market.

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