The average payment duration in the food industry is 60 days, and the number of payment delays remained low in 2017, with no increase expected in 2018.
- The agri-food sector is one of Spain´s most important industries, accounting for about 9% of the national economy and 2.4 million employees. Food accounts for more than 15% of total Spanish exports. After achieving record numbers in production, employment and exports in 2016, the Spanish food and beverage industry is expected to grow 1.3% in 2017 and 2.2% in 2018. While the industry is still fragmented with many very small players, industry consolidation is ongoing.
- Profitability of food businesses mainly depends on several external factors, such as weather conditions, commodity and energy prices, change in import regulations (foreign customers) and competition with businesses from countries with lower labour costs. Profit margins are expected to remain stable in the short-term future.
- There are many food companies with high short term-gearing. The external financing requirement of food businesses is high, and access to credit (both working capital and long-term facilities) has further improved in recent years, in line with the rebound of the Spanish economy.
- The average payment duration in the Spanish food industry is 60 days. Non-payment notifications remained low in 2017, and we expect no increase in 2018. Additionally,no insolvency increase is expected next year.
- Due to the food sector's resilience and stable payment behaviour we remain supportive in our underwriting stance. However, we are more cautious when underwriting the dairy segment (end of EU milk quota and lower prices) and the meat subsector (due to a significant price decrease after the summer of 2017, combined with higher working capital requirements). Special attention is given to highly geared companies, with close monitoring of the evolution of debt and credit lines utilisation rates.