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Agriculture : The Romanian agriculture hits record after record. The grain producing business has doubled in the past seven years
The Romanian agriculture continues its sustained development, amid significant investments in recent years. According to a KeysFin study, cereal production has doubled over the past seven years, from 8.34 billion lei in 2009 to 16.1 billion lei in 2015.
More than 7,000 companies , (with over 40,000 employees) are currently active in the Romanian agricultural market, on the cereal production segment, KeysFin data shows.
Compared to 2009, the number of companies increased by almost 30%, to 7194, with most producers registered in Timis (550), Constanta (541), Teleorman (362), Ialomita (349), Calarasi (343), Braila 339), Arad (322), Tulcea (322) and Dolj (314). Interestingly, more than 300 companies were registered in the capital city, Bucharest.
Amid significant investments in production optimization (higher quality seeds, treatments and equipment), the profitability of the sector increased more than 5-fold to 1.66 billion lei in 2015.
According to the data provided by the Ministry of Finance, Agro-Chirnogi SA from Calarasi, was the main player in the grain producing market in 2016. The company, with 623 employees, registered last year a turnover of 960.1 million lei, almost double than the previous year's result. The net profit was 12 million lei.
Agricost SA, from Braila, ranks second in the top of grain producers. The company, with 917 employees, registered in 2016 revenues totalling 387.2 million lei, a plus of over 21 million lei from the previous year, and a net profit of 71 million lei.
The next grain producer in the top is Plangtagro-Com SRL, with a turnover of 380.3 million lei and a net profit of 13.7 million lei in 2016. The company, registered in Vaslui, has 140 employees and managed one of the most spectacular evolutions in the sector, growing its business with over 114 million lei compared to 2015.
The fourth place in the top is held by Agroind Cauaceu SA. The company from Bihor, which has 127 employees, reported a turnover of 251.4 million lei last year, with 10 million lei more than the previous year, and a net profit of 7.3 million lei.
Beyond the performance of these companies, the evolution of Interagro SRL from Teleorman, one of the main players in the market in recent years is also worth mentioning. After having reported turnover of 374.5 million lei in 2015, in 2016 the company started the insolvency proceedings and its business dropped significantly to 21.5 million lei.
POSITIVE PERSPECTIVES AND INCREASING CHALLENGES
The data shows that, beyond the positive general evolution, the Romanian agriculture faces plenty of challenges. In 2015, the liabilities were paid in this sector, on average after 468 days, while the collection of receivables took on average 198 days.
"KeysFin statistics show that overall the situation has worsened in recent years. For example, the average debt collection period increased from 152 days in 2009 to 198 days, and the value of overdue invoices to suppliers surpassed 3.62 billion lei in 2015," said KeysFin analysts.
1,854 firms reported negative equity in 2015, but the number decreased from previous years. The value of the negative own capital though, reached 1.92 billion lei in 2015, from only 617.9 million lei in 2009, and the current liquidity (an indicator that is used to assess the company's ability to cover with its short-term obligations e.n.) increased in the same period from 0.93 to 1.05 in 2015.
"Generally, a current liquidity less than 0.8 is a negative signal, but it depends very much on the special characteristics of the scope of activity. The optimal value for this indicator is generally around 1. On the other hand, an excessively high liquidity rate could signal poor management,"KeysFin analysts explained.
Viewed from this perspective, the performance of the top 3 companies stands out. Agro-Chirnogi SA, the most important player in the cereal production market, had in 2015 receivables to collect of 388.7 million lei, up from the previous year. In the same situation is also Agricost SA, which has receivables of 153 million lei, 52 million lei more than in the previous year.
"Even if, overall, the evolution of the sector is a positive one, concluding a service or goods providing contract or seed, fertilizers, maintenance services procurement etc. may generate financial bottlenecks if the companies do not research thoroughly their business partners," said KeysFin analysts.
„"Staring with the phase of contract signing, right from establishing general and payment conditions, it is essential to consult some detailed credit and/or group reports prior to granting commercial loans and setting payment deadlines. Also in the post-signing period, it becomes necessary to monitor the clients using various sources, from Payments Incidents, to Insolvency Procedures data, changes of shareholders and administrators, etc., " said KeysFin analysts.
ROMANIA, THE BIGGEST CEREAL EXPORTER IN THE EUROPEAN UNION
Beyond the challenges, the prospects of the Romanian agriculture are extremely positive, including from the macroeconomic perspective.
According to the latest data provided by the European Commission, at the end of May 2017, Romania became the main European grain exporter. Companies in our country exported 7.15 million tons, almost a quarter of total European grain exports from last year’s harvest. Of these, over 5 million tonnes were exports of wheat (almost double the average recorded between 2011 and 2015).
From the European cereal production point of view, the grain harvest (including rice) increased by 12% between 2010 and 2015 to about 317 million tonnes, or 12.5% of the global production. Wheat, barley and maize were the main cultures (86% in 2015).
French firms accounted for 22.9% of EU cereal production, German (15.4%) and Polish (8.8%). Romania was the fifth EU cereal producer in 2015, with 6% of the total, a similar level recorded in Spain and Italy. .