Sector Study: Vegetable & animal oil & fats
Major decline in this year’s production output – Rising manufacturer’s prices
The domestic sector of olive oil manufacture & standardization is under investigation in a recent study conducted by Infobank Hellastat S.A. According to Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst, for the current year, Greek production is characterized by a number of problems, both in terms of quantity and quality, as a result of the prevailing high temperatures that were not favorable to olive trees, combined with the occurrence of olive fruit fly (Dacus oleae) attacks. Therefore, production output appears to have decreased by 19%, standing at approximately 260,000 tons.
Nevertheless, no market efficiency problems have arisen, since it is clear that the country has a surplus production, with sufficient stocks from the year before.
During the current period of 2016/17, a decrease in the production output is being noticed throughout the major olive oil manufacturing countries within the EU, as a result of adverse weather conditions. At the same time, numerous areas in Italy have been hit by the Xylella fastidiosa bacterium, which has also been traced in southern France and in Spain.
These negative circumstances have caused an increase in manufacturer’s prices for extra virgin olive oil at an international level. In Greece, the average price reached €3.76 per kilo in May 2017, recording an increase of 30% per annum, and reflecting thus the weak bargaining position of Greek manufacturers. However, this price is still lower than that of countries that are considered traditionally competitors, due to reasons that are associated with low standardization levels.
Comparatively, in May, prices in Italy fluctuated at a much higher level, at €5.91 per kilo, while they were formed at €3.98 in Spain. It is characteristic that prices were higher even in Tunisia, reaching €4.25.
It should be noted that the biggest handicap for the Greek market is the illegal trade of quantities of olive oil in bulk (unbottled), with these quantities accounting for the lion’s share of the production output.
According to Mr. Nikolas Gouzelos, CEO of Infobank Hellastat, “As a key requirement for the development of the sector can be seen the restriction of the trade of quantities of olive oil in bulk (unbottled), through the implementation of effective monitoring mechanisms, in order for the share market of standardized, branded products to be increased. The highest penetration level of bottled products will boost the reliability of the sector, since these products meet certain specifications, while it will also add to the Greek production, the value that it currently lacks, especially at an international level.
In the study conducted by IBHS, an analysis is performed on the financial statements of 85 companies. The main conclusions drawn can be summarized as follows:
• In 2015, Turnover rose sharply by 29.6%, at €437μ.
• EBITDA rose by 22.6%, at €14.9m, while pre-tax losses improved marginally, against €1.3m in 2014.
• The EBITDA and EBT margins rose to 5.5% and 1.7%, respectively.
• Capital leverage remained constant at 1.1 over 1.
• Receivables were collected within a period of 3 months.