Concerns and opportunities for suppliers due to crises

The word crisis consultation was not allowed to be used for a long time this year, but the Horticultural Crisis Team from Greenport Holland has really been on tour in recent months. The cultivation and technology sector is in line with lobbying for support to the sector. The first focus is cultivation, but this support may also prove important for technology companies. For example, a guarantee scheme for cultivation also helps the technology sector move forward because it will encourage investment.

But what about those who supply tech companies now? Following the corona crisis, the energy crisis is also affecting these companies. Investment plans are being reconsidered, also in other parts of the world. Companies can expect a restructuring, but also an accelerated transition. This can also encourage investment, as it turns out. Which effect is greatest is still unknown.

Codema has gone bankrupt

The sector was shocked in May when technology provider Codema was declared bankrupt. The technology company in Bergschenhoek opened another branch in China in 2019, but collapsed last month. Codema made the rapid development with money from an investment company, but did not achieve it due to loss of revenue in the corona era and corporate reluctance due to the energy crisis. After considerable interest from market participants, greenhouse builder Kubo quickly bought a large part of the company out of bankruptcy. It also expresses confidence.

It was already clear that technology companies also needed support in corona times. To retain staff, horticultural technology companies applied for around € 3 million in support in the fourth and fifth rounds of the NOW corona scheme in 2021. It was more than cultivation and trade.

Investor sees opportunities

On top of that comes the energy crisis. What does this mean for companies? Belgian investor Arvesta owns Dutch companies such as Benfried, Van der Hoeven (greenhouse construction) and the Flemish Hortiplan. Arvesta belongs to the Belgian Farmers’ Association. Arvesta expects ‘some negative impact’ from the second half of the year and especially in 2023 due to the sharp rise in energy prices. “Mainly in Western Europe. It is difficult to assess how big it will be. We are largely active outside Europe. The order book is well stocked. We do not expect an immediate fall either. The rise in energy prices also means that a number of countries are more likely to want to produce ‘locally and sustainably’, and the current situation may even act as an incentive for investment. ”

Costs are rising

However, there is a question of cost increases. The increased prices of glass and steel. How are they included in contracts for 2023? “It depends on what was in the sales agreement. Of course, sharp price increases must be passed on so that you do not work with losses, “says Arvesta.

There may be difficult considerations behind. For example, Martien Penning, a consultant and partner at the Hillenraad agency, knows that greenhouse builders also face a dilemma. “I recently spoke with a greenhouse builder about a signed contract this year. He can contractually enforce the construction, but if the customer does not have good prospects or financing, he can enforce it, but he also kills customers. Despite the portfolio being secured , it is therefore still uncertain. ”

Existing projects are being phased out, but if customers remain reluctant, the portfolio will dry out

Annie van de Riet, president of the industry association for technology companies AVAG

Depreciation a knob

Annie van de Riet, chair of the industry association for technology companies AVAG, points out that – as far as we know – no other Dutch AVAG members are in trouble. Codema appears to have been hit harder than the sector as a whole. “We see fewer full order portfolios. In the short term, not much is happening, but much depends on the geopolitical uncertainty. The existing projects are being phased out, but if customers remain reluctant, the portfolio will dry up.”

In addition to a guarantee fund for cultivation, Van de Riet also proposes tax measures in the Netherlands that stimulate investment, especially in the field of sustainability. “One could make investments more attractive from a tax perspective, for example through shorter depreciation periods.”

A lot of pain in sanctions

The difficult market situation is the talk of the day for AVAG members. Greenhouse Horticulture Netherlands works together in the lobby. In addition, AVAG distributes news to members about cases such as sanctions packages to Russia, which it receives via VNO-NCW. There is also a lot of pain in those sanctions. Van de Riet: “We are subject to sanctions, which means that projects are not phased out and offers are not answered. As a result, tens of millions of euros are already at stake for our members. ” It was already common for customers in Russia to pay in advance, but if customer relations have existed for so long, it is difficult to impose sanctions on those companies, says Van de Riet.

No quick fix

The AVAG chairman also does not see a rapid recovery in the market at the moment. “There is concern that if peace is signed tomorrow, production will not be restored just like that. Part of the steel production also came from Ukraine, a lot of steel was produced around the hard-hit Mariupol and 40% of the glass came from that region. ”

It also differs from company to company, says Penning. “If you look at technical suppliers, they have become much less dependent on the Dutch market. It just depends on what markets you are in. If your customers are in the region around Russia, it is different from Canada. In Canada, gas prices have doubled, but of a completely different order of magnitude. There is the energy factor of a completely different order. ”

source.ag

The Dutch scale-up Source.ag shows that investment markets still have confidence in horticulture. The company grew to fifty employees in a year and a half with money from investors and Harvest House. Not unusual in itself for software developers, but parties like this one also seem to be doing well in a difficult market. Source.ag automates cultivation with data-driven algorithms. “We are currently in negotiations with many parties, in the Netherlands and abroad. There is a large stream of greenhouses that will go online in the coming months,” says co-founder Rien Kamman. The efficiency gains from data-driven cultivation partially absorb cost increases. opportunities under the current star.Kamman points to another growth factor internationally.A Rabobank study showed that high-tech greenhouse horticulture in Europe covers 25,000 hectares, but in other parts of the world, such as the US, only a few thousand hectares.

Are you stepping in to get out in five to seven years, or do you believe in the strength of the sector?

Martien Penning, consultant and partner at the Hillenraad office

Not fast off the leg

Most international investors therefore do not get off to an easy start, Penning believes. “I myself distinguish a lot between investor and private equity companies. Are you stepping in to get out in five to seven years, or do you believe in the strength of the sector? Arvesta or NPM, they do not just go ashore. You also have other investors who put money into a private equity fund and expect that the companies in the portfolio will be worth much more in five to seven years, and then sell them again. ” The fact that investors are now investing in a new company like Source.ag is not necessarily proof of continued confidence, he says. “Startups involve relatively small amounts.”

Indoor farms are also affected

Source.ag focuses on automating conventional cultivation. What the cost increase does to the cost price for fully controlled cultivation in indoor farming can also be guessed at. Penning: “The calculation is now different for cultivation in indoor farms without daylight, with two energy guzzlers. You must first insert all the growth light and then cool the heat. But here, too, efficiency is increasing. In places with very cheap electricity and high product prices, this cultivation method is an interesting alternative, but if you want to grow kilograms of tomatoes, I see the glass greenhouse as the best option at the moment. ”

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