JUN
23
Oana Barna, Chief Financial Officer of Grup Șerban Holding, attended the sixth edition of the Quarterly Report event, dedicated to investors and companies listed on the Bucharest Stock Exchange. The event was organized by Ziare.com, alongside its main partner TradeVille, and took place on Wednesday, November 27, at ONE Tower. Barna discussed the company’s performance during a challenging year for the agricultural sector and the future of agricultural companies, focusing on irrigation. The company is close to completing an irrigation project for 300 hectares and has submitted another initiative for a similar area. "Grup Șerban currently cultivates approximately 15,600 hectares, of which about 2,500 hectares are irrigated. We are in the process of completing a project to irrigate an additional 300 hectares, plus another proposed project to irrigate another 300 hectares. Grup Șerban has turned its focus to water resources because it has clearly recognized their potential. If previously irrigation provided a productivity boost, I would say that now it could be the defining factor between remaining in or exiting the agricultural sector," emphasized Oana Barna.
The representative of Grup Șerban explained why a significant portion of farmers are not organized to irrigate their plots. The regulatory framework is such that it complicates access for small-scale farmers and primarily allows larger companies to access funding. "According to existing statistical data, from what I understand, around 1.5 to 2 million hectares have the potential to be irrigated, but in reality, probably only about 700,000 hectares are currently being irrigated. First of all, we need to understand the framework in which these irrigation projects can be implemented. To use irrigation infrastructure, you must first establish yourself as a Water Users’ Organization for Irrigation (OUAI). Once you are organized in this way, ANIF (National Agency for Land Reclamation) hands over part of the existing irrigation network, and only an OUAI can apply for funds to rehabilitate the infrastructure. This is the context farmers need to navigate to irrigate their land," explained Oana Barna.
The CFO of the company stated that there are several prerequisites before farmers can start irrigating their land. One important aspect is financial, as the process involves substantial initial investments. "I think it’s more accessible for large companies to do this than for small farmers. The first condition is to be located near a water source, meaning you need to be close to a river with a sufficiently large flow or a reservoir. Then, to start irrigating, you must establish a Water Users’ Organization for Irrigation (OUAI), which requires some basic managerial knowledge and an understanding of the legislation. You also need a basic understanding of fluid mechanics terminology. So, we’re talking about a set of knowledge that farmers must have to even begin considering the idea. The second aspect is financial—you need money, even if you receive 100% funding from AFIR (Agency for Financing Rural Investments). However, you still need to put up some money upfront because AFIR reimburses the funds at the end. First, you invest; they give you an advance, you invest, and then they reimburse you. But at least 10% of the project’s value needs to be available upfront," Oana Barna explained.
These projects involve significant amounts of money, effectively excluding small farmers, especially during years that haven’t brought substantial profits. "In our case, the first project cost €1.8 million, and the second €1.5 million. So, a 10% advance represents a substantial amount of money that small farmers might not have. Even if we suggest they take out a loan—great—but what would they use as collateral? Recent years in agriculture haven’t allowed them to save much, and what they do own—homes, tractors—is probably already mortgaged. Furthermore, farmland is very fragmented. That’s why I say this is more applicable to larger-scale farmers—because to irrigate and be efficient, you need relatively consolidated land," said Oana Barna. These challenges are compounded by operational difficulties, particularly since traditional financing is often unavailable. "I’ve only mentioned a few obstacles that a farmer might encounter to effectively start irrigating, but there are many others. On the operational side, there are costs—just to get started, you need working capital. For this working capital, you clearly need financing, but irrigation projects cannot typically be financed through banks. Banks don’t fund such projects because they’re primarily underground, and banks won’t finance something they can’t see. Again, this is a problematic aspect for irrigation," added the Grup Șerban representative.
Povestea din spatele unei investiții majore
Barna a oferit mai multe detalii despre o investiție majoră a companiei, de peste 300 de milioane de lei, legată de procesarea și depozitarea cartofilor.„Chiar în octombrie am anunțat această investiție de 62,5 milioane de euro. Grup Șerban a început acum 5-6 ani cultura cartofului și a plecat de la aceeași ideea, a irigațiilor. Ca să dai valoare unui teren irigat, cel mai bine e să mergi cu o cultură care îți face o valoare adăugată mai mare decât ar fi cultura clasică. Una e să pui porumb la irigat, alta e să pui o legumă la irigat. A fost un proces de învățare. Noi zicem că astăzi, după 5 ani, am ajuns să știm cum să o facem. Nu spun că nu mai este de învățat, sigur că da. În fiecare an trebuie să te adaptezi pentru că condițiile climatice sunt în mișcare și culturile vor trebui adaptate într-un fel, dar avem tot ce ne trebuie pentru a produce cartoful”, a explicat directorul economic.Pentru a valorifica produsul, compania a decis să apeleze la depozitare, pentru a putea ieși pe piață și în alte perioade ale anului.
"In 2020, we decided it would be more efficient to sell during the November-March period rather than directly from the field, as it would allow us to sell at a better price with added value. This can only be achieved through storage, which, although it seems simple, is actually a fairly complex process. In 2020, we started with a small capacity of about 6,000 tons and a small packaging line. In 2021, we initiated a project aimed at a storage capacity of 15,000 tons, which is set to be completed in early 2025. It’s practically finished, but we still need to get all the permits and authorizations to begin using it," she explained. The Romanian market indicates a high profit potential in the potato sector, given that per capita consumption exceeds domestic production. "The two projects mean new storage capacities on the one hand—approximately 30,000 tons—plus a packaging line capable of handling 30 tons per hour and a potato processing plant. The market potential is very high. Consumption in Romania is around 50–60 kilograms per capita, while the country produces only about 10% of its potato consumption. Clearly, there is room in the market, and this move was a natural one—the projects fit perfectly. Of course, we’re just at the beginning with them. Right now, Mr. Nicolae Șerban is on a business trip to study and assess which technologies would be best suited for this potato processing plant."
"So, we are currently in the feasibility study phase, after which we will move into the normal phases of design and authorization. We estimate that by early 2027, we will be able to effectively launch these projects. Considering these are €62.5 million projects, they will undoubtedly have a significant impact on Grup Șerban’s assets and overall value. Hopefully, we will be able to successfully complete them," explained Oana Barna. What Does Agriculture Need? Looking ahead, Romania’s agricultural sector could benefit from a shift in focus from large-scale crops to those with higher added value. Additionally, the sector should invest in processing and logistics. "In the short and very short term, I would say we need rain. In the long term, my view is that the strategy should now shift towards areas that bring added value. Romanian farmers know how to produce large-scale crops; we’ve learned how to do this, we’re good at it, and we export them. Let’s invest more in livestock farming, using those grains locally because they provide higher added value. Similarly, in vegetable farming—we import a lot of vegetables and fruits. As I’ve said, there is irrigation potential, so let’s put it to proper use. We should invest in processing, and alongside processing, there is a clear need for logistics to support the development of the processing sector, particularly for vegetables and meat," argued Oana Barna.
Financing as a Priority Area One of the priority areas is financing, where the state should continue to facilitate access to funding, but farmers must also seek private sources, according to Grup Șerban’s representative. "The state should continue to support farmers’ access to funds. As I mentioned earlier regarding irrigation, we need to make it easier for them to access funds for various projects. We’ve also felt some of these challenges. One source of funding is the capital market, which can provide long-term financing, but it would be more accessible if the banking sector also offered long-term financing. Generally, financing is short-term, making it difficult to manage projects," noted Oana Barna. Adaptability in the Agricultural Sector Another essential aspect for the future is adaptability in the agricultural sector to climate change, encompassing both crops and technologies. "What we need to do, I believe, is to adapt more quickly to what’s happening: to adjust crops to the realities of environmental changes. It’s not just the crops that need to be adapted, but also the technologies and the way we work the land. For example, we need to preserve as much water as possible in the soil, and there are technologies—such as no-till or minimum-till farming—that help conserve water in the soil. Beyond that, they also have environmental benefits, such as carbon dioxide capture. In the end, I’d say we need to change our mindset as farmers and reconsider old customs related to associations and cooperatives. There are many advantages to farmers working together—besides having greater negotiating power for inputs and sales, it’s much easier to access funds. I’m not saying this is the only solution, but it could help," argued Oana Barna.
Investițiile au prioritate
Ca răspuns la o întrebare despre momentul în care Grup Șerban va începe să plătească dividende, directorul economic al companiei a punctat faptul că proiectele de dezvoltare din această perioadă necesită ca banii să rămână în firmă.„Pentru că suntem în această perioadă de dezvoltare, numerarul rămâne în companie pentru a finanța aceste proiecte. Unele sunt în curs de finalizare, iar, în afară de cele menționate de depozitare și irigare, mai avem un proiect cunoscut pe piață, pe ga hale de găini ouătoare cu o capacitate de 50 milioane de ouă, care ar trebui să fie și finalizat undeva la mijlocul anului viitor. Cel mai devreme cred că vom putea anunța dividende la sfârșitul anului 2026, deci am avea o distribuție în 2027 din profitul aferent anului 2026”, a încheiat reprezentata companiei.
