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Study Coface: the number of companies who cultivate cereals and have income of over 1 million euro has tripled

The number of companies with income higher than 1 million euro out of the cultivation of cereals grew constantly, from 215 in 2008 to 679 in 2015, the share of the market share among them growing from 60% (in 2008) to almost 70% (in 2015) a Coface study shows.

According to the financial statements placed at the ministry of public finances for 2015, the number of companies which work in the sector of cereals cultivation (CAEN 0111)is 8,056 out of which 1,438 (18%) did not have any  activity which 2,692 (33%) had lower income than 100,000 euro.

The phenomenon of division, characteristic for the whole business environment in Romania determined that the number of companies which activate in this sector grow by 18% since the impact of the financial crisis (2008)  up to the present, while the income doubled, from 8.5 billion lei in 2008 to almost 16.8 billion lei in 2015. Taking into consideration the figures reported by Eurostat regarding the agricultural production for 2016,as well as the evolution of the price of cereals (nominal effect). Coface estimates that the level of the income reported by this sector for 2016 registers a consolidated growth of 5% as compared to the previous year.

‘We notice a series of factors which generate pressure on the liquidity of the companies which activate in the sector of cereals cultivation: volatility of the income (as the dependence on the weather conditions and the fluctuation of the prices), the drop in profitability, the delay of the payments by APIA, the extension of the deadline for debt payments and the trend to deregulate with the support of the investments on long term. In this context, the payment behaviour of the companies in this sector had a deterioration in 2016’ Iancu Guda, Services Director Coface Romania  said.

According to the financial statements presented, the study shows that the liquidity of the companies is deteriorating constantly. The working capital ( the rate between the assets and the level of short-term debts) drops to 1.22 (2012) to only 1.05 (2015) growing the degree of fragility of the companies  in case of not collecting the debts or the volatility of the prices of the stocks, both scenarios being very probable in this sector. In the context, the degree of payment of the short-term debts through the treasury drops from 14% (2012) to only 9% (2015).

One of the main causes which generate pressure on the liquidity is the constant growth of the period for collecting debts from 112 days in 2008 to almost 193 days in 2015, much over the national average recorded the same year, of 114 days. Agriculture, in general, and the sector of the cereals cultivation specially, records the most extended term for collection of the debts at national level. In this context, the companies which activate in this sector required the extension of the payment deadlines to the suppliers, this growing from 215 days (2012) to 335 days (2015).

The indicators for profitability are dropping between 2012 – 2015 with the trend to stability over the last period. The level of the average consolidated profit at the level of the sector for 2015 was 5.7% inferior to the average recorded between 2011 – 2012 (approximately 8%) but over the minimum level of profit reached in 2009.

The agricultural sector in general, is under financed by comparison to the added value generated in the GDP. The share of agriculture in the formation of GDP varied between 8% - 10% between 2007 – 2015 while the balance of the loans offered by the banking sector in the total of loans grew from 3% in 2007 to only 6.1% in 2016.

In 2016 there were 1,423 commercial trials against the companies in the sector, growing by 78% against 2015. The biggest growth was  in the number of forced execution trials, namely 1,034 ones. While, at the same time, the value of the fiscal debt  in this industry grew by 32% during the previous year, from 63 million lei in 2015 to almost 84 million lei in 2016.