Satisfactory demand in 2016 – Illegal agrochemicals have continued to be an issue of concern

The domestic sector of agrochemicals (plant protection products) is investigated in a recent study conducted by Infobank Hellastat S.A. According to Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst, demand for agrochemicals has been satisfactory from 2014 onwards, due to the fact that the farmers’ income showed an improvement after a decade of continuous decline, as a result of subsidies under the new Common Agricultural Policy (CAP) that have been in effect since 2015. At the same time, higher manufacturers’ prices in a number of basic commodities have captured growers’ interest, which resulted in increased amounts of used inputs. Besides, a minor drop in the production cost is recorded, following a major rise during the first 4 years of the recession.

These circumstances have been reflected in the rising expenditure on agrochemicals over the last years, having increased – according to estimates by Eurostat – by 2.7% to €232.3m.

On the other hand, the illegal imports of unauthorized agrochemicals, mostly from Bulgaria and Turkey, have continued to an issue of major concern, since this practice became more intense last year, due to adverse economic conditions, and increased taxation. Illegal trade is facilitated by the existence of insufficient monitoring mechanisms, absence of electronically prescribing agrochemicals until recently, and small fines that are imposed. Besides, the incentive for distributing and using them is their fairly lower price, compared to that of legal products, while they are not burdened with VAT. Therefore, they cause unfair competition to companies of the sector, and stores selling farm supplies.

Moreover, companies that operate in the sector suffer major delays in collecting debts from partnering stores, which can even exceed 6 months in some cases.

According to Mr. Nikolas Gouzelos, CEO of Infobank Hellastat, “The provision of support to the farmers is an essential condition for the development of the sector, in order to achieve a boost in their liquidity, and enable them to successfully deal with the high production cost, and loan obligations. Furthermore, in order to deal with the issue of illegal imports, the competent monitoring authorities should intensify inspections, and the implementation, in general, of a coordinated program, in order to fight the spread of this phenomenon.”

 

Financial analysis

In the study conducted by IBHS, an analysis takes place of the financial statements of 24 companies. The main conclusions drawn are presented in brief below:

•    In 2015, Turnover rose by 5.9%, at €473.41m.
•    With the exception of a single major corporation that operates in the sector, EBITDA appear to have slightly decreased, while EBT increased by 7%.
•    The EBITDA and EBT margins decreased to 5.6% and 2.5%, respectively.
•    Capital leverage remained constant, at 2 over 1.
•    Receivables were collected within 5 months, while Inventories were held over a period of 4 months.

 

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