Fedecom: Most mechanization companies are feeling the effects of war

More than 70 percent of mechanized entrepreneurs surveyed experience major to very large consequences of the war between Russia and Ukraine. It appears from a poll conducted by the federation Fedecom among two hundred members.

The companies say they are struggling with sharp price increases and delayed deliveries of machines, parts and components. This was identified as the biggest problem by 95 percent of the respondents. Deliveries of agricultural machinery later than planned are extra annoying for the users for an optimal progress of the spring work. These are agricultural and horticultural companies, construction companies and managers of nature and sports parks.

Buyers and suppliers are experiencing that price increases are skyrocketing and that this is putting pressure on the relationship. Price increases of 20 to 30 percent of planned deliveries are no exception. More and more suppliers are also experiencing that buyers / customers are becoming more uncertain about their investment plans as a result of the ongoing war.

Higher costs, lower revenue

About 77 percent of the mechanization companies surveyed expect 10 to 30 percent higher costs due to higher purchase prices of machinery, components and parts, but also due to higher energy costs.

70 percent of respondents expect a drop in revenue of up to 30 percent, for example because deliveries are delayed. Manufacturers are more pessimistic about this than retailers. Companies in the sector do not believe that price increases will be fully overturned in sales.

Manufacturers and retailers are fully committed to taking measures to mitigate the effects of delivery delays and rapidly rising prices, the study shows. The participants mentioned as top three initiatives: including indexing prices in offers, shortening the offer time and entering into a dialogue with the customer. In the open block of answers, the following is often mentioned: a combination of different actions.

Spread of price increases

It is striking that many survey participants note that delays in deliveries and price increases should be spread across the chain. This can be translated as a call from machine manufacturers and dealer companies that each link in the chain bears part of the price increases.

UKRAINE THEME: Russia invaded Ukraine on 24 February. This war also has consequences for the Dutch agricultural sector. Follow the latest developments around the war in Ukraine.

‘The results of the short study show what is actually happening in mechanization practice. Raw material suppliers, producers, retailers and buyers / users each absorb some of the price increases and delays’, says Fedecom director Gerard Heerink. ‘It can also be concluded from the declining gross margins of machine manufacturers and dealers in the last two quarters.’

“Although machine vendors make every possible bend to serve customers in a timely manner and at reasonable prices, there is currently limited security that can be offered,” he says. “Market experts expect the disruption of prices, logistics and thus deliveries of goods to continue into 2023.”

Additional measures

More than 60 percent of survey participants want further action. Public contributions or financial support are not so much considered, but more transparency in cost calculations, use of benchmarks and additional agreements when submitting and processing tenders. ‘It’s not that easy to take effective action across the industry or to give advice that does not affect competition,’ says Heerink.

‘However, it is recommended that the rights and obligations in the Fedecom’s general terms and conditions of delivery be applied correctly with mutual respect in a business coordination between links in supply chains. Being aware of exchange prices, offers, monitoring of commodity and commodity prices and, above all, direct consultation of buyers and suppliers will be extra important in the coming period. ‘

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