You don't need to tell Robin Schilder and Frank Meijnders how dire the situation in greenhouse horticulture is. As a Specialist in Business Restructuring, Schilder guides entrepreneurs in financially challenging situations. Meijnders has been active for BDO in the Westland region for almost 25 years and is, among other things, chairman of the national BDO Industry Group Food & Flowers. "It seems to be a 'perfect storm' that is now hitting the greenhouse horticulture sector. Many growers are really struggling. Without help, many growers are not going to come out of this."
Like snow in the sun
Through his years of experience in actively guiding entrepreneurs in difficult times, Robin has the right expertise to assist them in this difficult period. Among other things, he has worked in a special management department of a bank and he has final responsibility for BDO's restructuring practice. "The current situation is extreme. Last autumn, the ongoing gas crisis was the reason Frank and I sought each other out. At the time, it seemed as if things could not get any worse, but they only got crazier. We have previously experienced the consequences of the credit crisis for the agricultural sector at close quarters. Overfinancing by many farmers made them vulnerable, especially when it came to cultivation problems, whether or not in combination with poor pricing, but that challenge is out of proportion to the problems we are now facing. We are now talking to growers who have chosen to liquidate assets to cover the financing of their operations, but that money has disappeared like snow in the sun in three months, just because of increased energy prices. While we know that in many cases these assets are an important part of future investments or - even more poignantly - are an important part of the provision for old age".
"At the same time, the differences per business are huge. The crops with a high energy tax are now being cut back on. On the other hand, there are some horticulturalists who have long-term energy positions and they are speculators. There is a lively trade in gas positions at the moment. Many horticulturalists are leaving their gardens empty and trading their gas contracts. But a significant proportion of greenhouse horticulturists have major concerns at the moment," Robin emphasizes. "The COVID support measures are now over, but many companies have deferred payments. The question is really how much meat they have on their bones to cope with the current crisis, but also to make follow-up investments. I really have big concerns about that."
Future-oriented business model
"It's not as if the average greenhouse grower's profits are soaring. It only takes something like heavy financing or rising raw material costs for the operation to start buckling. But the speed at which returns are now deteriorating is very extreme," says Robin. "It is therefore a huge challenge to find a solution for the current crisis, let alone to work on a future-oriented business model. At the same time, this is the moment to face up to the fact that we have to use this crisis to tackle the problems and challenges for the longer term."
The first approach in the discussions that the BDO advisors have with growers is to get them to keep a cool head. "Many growers are family businesses, where there is a great deal of discussion between them. We regularly see that a sort of vicious circle arises, where people no longer see the head and the tail. I sometimes compare it to deer in the headlight. The challenges are so great that people no longer see the whole picture and don't know where to start. It is up to us to zoom out and bring rationality back into the conversation without losing sight of the emotion, which is understandably there too. Of course, we also always continue to offer a listening ear to the challenges and - unfortunately in many situations - the suffering that is present."
Out of the vicious circle
"In the short term, the aim is to create financial insight and overview, so that they can ensure that they can pay at least their staff, the tax authorities and their main suppliers. If you lose that overview, the problems only get bigger. By asking the right questions, you try to break out of this vicious circle. By having a (financial) overview and a plan with which you should be able to pay the bills, at least for the coming weeks, you buy, as it were, time. And in many cases, that is very valuable time that you can better spend by putting the options per company on the table. This means that all the options have to be put on the table and you have to peel them back together. In some cases, this calls for rigorous measures to prevent greater damage - and here we are also looking specifically at the interests of the private owners and their families behind the business. This is not just talks, but above all action," observes Robin.
"And that requires fundamental choices", Frank agrees. "In this sector, quite a few people are privately liable. On 1 January 2021, the Wet Homologatie Onderhands Akkoord (Homologation Undertaking Act or 'WHOA') came into force. The WHOA gives companies in financial difficulties the opportunity to restructure their debts in order to avoid bankruptcy or to wind up the company in a controlled manner. The aim of this new law is to increase the ability of companies to reorganize and retain business value. The WHOA can also be used to break open millstone contracts. For example, these are contracts that weigh so heavily on operations that they stand in the way of recovery. That is still better than saddling the next generation with a huge debt burden. Another scenario is to hibernate the company and minimize costs through part-time unemployment or short-time work. Another very real alternative at the moment is to move production sites, for example to Southern Europe or North Africa, where crops can be grown at a cost price that is sometimes a third of the cost price here."
External support measures
"Personally, I am very curious as to what role the government sees itself playing in this crisis. I think that the current situation is so extreme that the sector will not be able to get out of it without external support. At the same time, it cannot happen without conditions. The government wants to initiate a sustainable transition and all glasshouse horticulturalists should grab hold of that now. In many cases, the entire business model of glasshouse horticulturalists has proved too vulnerable. If this transition towards sustainability and the scaling-down of dependence on gas is not initiated now, who is to say that we will not have the same problem in a few years' time! The scenario that is taking place now is also not inconceivable in the future. Therefore, in addition to today's problems, we must also look to tomorrow and the day after tomorrow and critically examine the revenue model to see how viable the current business strategy is."
"The sales model, too, will have to be scrutinized. Due to the limited number of sales channels, the producer is often the weak link at the negotiating table. Strategic alliances between growers should lead to greater negotiating power. A lot has been said about this over the years, but there has been little or no actual action in this area", notes Frank. "I also think that the question should be asked as to what can be expected from supermarkets in this crisis, apart from the government. They know the situation that is going on now, but the millstone contracts that are being entered into knowingly only help the producer deeper into the malaise. Retail, in general, has benefited enormously in recent years and sales have exploded. Then these extraordinary times call for extraordinary measures from them too, where they have to take responsibility."