JUN
23
Serban Holding Group SA, the leading entrepreneurial company specializing in agriculture listed on the Bucharest Stock Exchange (BVB), recorded a significant increase in net profit of 48.2% in the first nine months of the current year compared to the same period last year, according to a report by TradeVille's Analysis Department.
Although 2024 has been filled with many challenges in the agribusiness sector, similar to the past two years, Șerban Group has once again demonstrated resilience in the face of geopolitical pressures and climate change, showcasing a remarkable capacity for adaptation.
Serban Group, a collective of Romanian-owned companies founded by Nicolae Șerban in 1994 in Onești, is one of the most important players in the agribusiness sector. The group boasts multiple lines of activity, including agribusiness, livestock farming, bakery production, and service provision. Its main activities include the cultivation and sale of grains, oilseeds, and vegetables; the breeding of cattle (Black Angus) and sheep (Île de France) for meat; the production and sale of bakery, confectionery, and pastry products; as well as distribution and transportation services.
Covering multiple lines of business, the group's activities are distributed across various areas, depending on the specialization of its subsidiary companies, as follows:
- Interagroaliment SRL (IAA), the Group's first business, established in 1994, focuses primarily on crop cultivation and livestock farming.
- Ferma Avicola Șerban SRL (FAS) shifted its business line at the beginning of 2023 from broiler farming and internal feed production to leasing production halls and producing feed for sale to third parties.
- Fabrica de Pâine Șerban SRL (FPS), integrated into the Group in 2008, specializes in the production of bread, cakes, and fresh pastry products.
- Serban Distribuție SRL (SD), integrated into the Group in 2005, is responsible for distribution and logistics services.
- FYN Invest Danmark SRL (FYN), a company acquired in 2023, primarily focuses on the cultivation of grains, leguminous plants, and oilseed-producing crops.
- Luma Land SRL (LUMA), also acquired last year, is engaged in crop cultivation and livestock farming.
Serban Group, the first in the North-East region to implement regenerative agriculture on large areas, is controlled as of December 6, 2024, by Șerban Lucian Nicolae, the founder and CEO of the company, who holds a 95.82% stake. The remaining 4.18% represents the free float, predominantly owned by individual investors (3.69%).
• Challenges for Agribusiness Companies
The grain production crisis facing Europe, marked by a combination of unfavorable weather conditions, high production costs, volatile prices, low harvest quality, and fierce competition from Ukraine, has caused significant challenges for agribusiness companies over the past three years. In November, the European Commission expressed concern about grain production, which is projected to reach only 255.6 million tons this year, 9% below the historical average.
Agriculture Minister Florin Barbu stated at the end of August that Romania recorded a wheat production 1.7 million tons higher than the same period in 2023, despite the severe drought affecting 2 million hectares of both spring and autumn crops. According to him, by the end of the first eight months of 2024, Romania had 1.6 million hectares under irrigation. Sunflower production exceeded the domestic consumption of 800,000 tons, achieving self-sufficiency with a harvest of 1.3 million tons. Regarding the future of Romanian agriculture, Barbu estimates, based on data from the London Environment Agency and other specialized institutions, that 2025 will see significantly higher yields, thanks to favorable climatic conditions expected to help address the soil water deficit.
According to the forecast released by the European Commission in August, Romania ranks among the last in the European Union in terms of potato crop yields. Based on last year’s potato production, the country ranks 9th at the European level. The latest European Commission estimate was revised downward from the July forecast, which had anticipated better yields per cultivated hectare. Thus, the estimated yield per hectare was 14.8 tons, 4% lower than the initial forecast but 5% higher than the previous year. The president of OIPA (Interprofessional Organization for Potatoes) stated that potato prices this year will be similar to those in 2023, with producer prices ranging between 1.2-1.6 RON/kg and retail prices between 3-3.5 RON/kg.
. Serban Group – Increasing Revenues
In the first nine months of the year, Șerban Group recorded consolidated revenues of 439 million RON, 3% higher than the same period last year, while net profit increased significantly by 48.2%, and EBITDA rose by 27%. The company primarily focused on optimizing margins and products with high-margin potential, such as vegetables, with the increase in grain prices also playing a significant role in achieving these results.
Regarding the consolidated revenue and expenditure budget, it was revised downward at the end of the first half of the year due to the challenges faced by the agribusiness sector this year. Thus, Șerban Group achieved approximately 70% of the proposed total operating revenues and expenses for the current year in the first nine months, as well as 67% of the operating profit and 69% of the net profit. Additionally, the net margin increased by 1.5% over the nine months compared to last year, reaching 4.72%, according to TradeVille.
Interagroaliment SRL (IAA) recorded a 35% increase in net profit compared to the third quarter of the previous year and a positive difference of +26% in the EBITDA indicator.
- Ferma Avicola Șerban SRL (FAS) – The shift in business activity from broiler farming and feed production to real estate operations through the leasing of production halls led to a 73% decrease in the activity of the poultry farm, with the entity's operating revenues dropping to 9.7 million RON. Additionally, net profit decreased by 76% compared to the previous year.
- Fabrica de Pâine Șerban SRL (FPS) – Net profit increased by 57%, totaling 1.5 million RON, while EBITDA grew by 24% compared to the same period last year.
- Serban Distribuție SRL (SD) – Operating revenues doubled, with net profit totaling 1.2 million RON, representing an impressive increase of +315%.
- FYN Invest Danmark SRL (FYN) – After its inclusion in the group in 2023, FYN generated a net profit of 62,000 RON (+168%).
- Luma Land SRL – The new company, owned by Șerban Group since 2023, closed the third quarter with a profit of 64,000 RON, marking the first quarter in which it reported a positive result.
• Optimistic Outlook
Oana Barna, Chief Financial Officer of Șerban Holding Group, announced during the Quarterly Report conference organized by Tradeville that the irrigation project for 300 hectares, currently under development, is nearing completion, and the company plans to implement another project on a similar area. Of the 15,600 hectares cultivated by the Group, only 2,500 hectares are currently irrigated. However, upon the completion of the two ongoing initiatives, the irrigated area will increase to 3,100 hectares.
Additionally, another significant investment, worth over 300 million RON (62.5 million EUR), with a four-year duration, was recently announced by the company. This investment focuses on processing French fries and expanding the cold storage capacity for vegetables in Sascut, Bacău County. Șerban Group began cultivating potatoes five years ago as part of a strategy to add value to irrigated land, as potatoes generate higher profits compared to traditional crops like corn. Oana Barna noted that the potato market has high profit potential, with per capita consumption in Romania at 50-60 kg, while the country produces only 10% of its potato consumption.
Regarding dividend distribution, Oana Barna stated that Șerban Group is still in a phase of intense development, with numerous ongoing projects requiring significant investments, making it impossible to distribute dividends at the moment. She also mentioned that the most likely announcements regarding dividends could come at the end of 2026, with distributions expected to take place in 2027, from the profits earned in the previous year.
. Nearly 10% Increase for GSH Stock Since the Beginning of the Year
At its debut on the AeRo market, GSH's share price reached a historical high of 2.20 RON. However, since its listing in 2022, the stock has experienced a negative performance, declining by 24.55%. Following its debut on the Bucharest Stock Exchange (BVB), the share price entered a downward trend, hitting an all-time low of 1.34 RON on June 14, 2023. Between June 15, 2023, and May 28, 2024, the price stabilized within a lateral evolution at the resistance level of 1.69 RON, followed by a breakthrough on June 3, 2024, when the stock entered an upward trend.
Since the beginning of the year, GSH's share price has recorded a significant increase of 9.93%, outperforming the BET AeRO index, of which it is a part, which has declined by 15.87%. At the same time, the company has shown much better performance compared to its main competitors on the Bucharest Stock Exchange: Agroland Business Systems (-15.16%), Norofert (-18.57%), and Holde Agri Invest (-51.81%). At the end of the trading session on December 5, the share price reached 1.66 RON, falling below the 50-day simple moving average of 1.68 RON.
. Opportunities and Risks of Investing in Șerban Group
Opportunities
- Financial Performance: Despite the challenges faced by the agribusiness sector, Șerban Group has achieved numerous milestones, including remarkable financial results that significantly outperformed last year’s performance. These achievements not only confirm the effectiveness of the strategies implemented but also highlight the potential for sustainable long-term growth.
- Progress: Șerban Group has made significant advancements in projects initiated in previous years. By mid-2025, vegetable storage capacities are expected to reach 15,000 tons, the packaging line will achieve a capacity of 30 tons/hour, and annual egg production is projected to exceed 50 million.
- Financial Support: The group has secured significant funding of approximately EUR 38 million from the state for two key projects in its development process. The total investment in the potato processing plant amounts to EUR 47.2 million, of which EUR 28.3 million comes from non-reimbursable state funds. For the second project, which involves the construction of storage and processing facilities for potatoes, valued at EUR 15.3 million, public funding accounts for EUR 9.99 million.
- Syndication Agreement: In December of this year, Șerban Group will sign a syndicated credit agreement worth EUR 73 million in collaboration with Banca Transilvania, BRD, and Raiffeisen Bank. The purpose of this agreement is to optimize the company’s financial position, ensuring more efficient management of financial resources.
Risks
- Price Fluctuation: Like any company in the commodities sector, Șerban Group constantly faces fluctuations in grain prices and the volatility of the commodities market, factors that directly impact its performance.
- Low Liquidity: The CEO's ownership of 95.82% of the company's shares results in a free float of only 4.18%, which directly impacts liquidity in the capital market. It is worth noting that GSH was listed during a period marked by the Ukraine war crisis, which did not require a 10% free float. This issue could be addressed over time if the majority shareholder decides to sell a portion of their shares on the market.
- Audit: The qualified opinion issued by the company that audited Șerban Group's 2022 results has raised concerns among investors regarding the reliability of the financial data published by the Group.
The sources mentioned by TradeVille in this report are: company report, MSN, local press, and the Quarterly Report conference.
