20 Years in Figures – Financial Analysis of the Largest Hungarian Agricultural Corporations

Katits, Etelka – Szalka, Éva

Keywords: profitability, liquidity and indebtedness, efficiency, growth rates

Our study examines the evolution of the financial positions of the largest domestic and foreign majority-owned agricultural companies, based on data from 20 years of business balance sheets and profit and loss accounts. We examine the components of ROI, ROA, ROE Return on Investment, Return on Assets and Return on Equity ratios, realisation of profitability-efficiency requirements; and we calculate growth rates and value drivers. The objective of our study is to highlight the changes in income, financial and assets positions of the agricultural enterprises on the basis of the database; these are the underlying cause-and-effect relationships. Based on the test results we recommend that the focus of shareholder value creation of agricultural enterprises should be based on the value drivers. In our analysis, we conclude that the picture is mixed. In fact, we reached somewhat contradictory conclusions on the basis of results of calculations. The largest agricultural companies have the following characteristics: (a) extremely high (90-95 per cent) operating cost ratios, (b) their ability to pay is relatively good, (c) they achieved low internal growth rates, (d) their capital structure, during the years of the study, was always stable, (e) sustainable growth rates varied across the range 17.8-1.3 per cent (in 2003 and 1993 with negative value), and (f) an increase in net sales revenue over the sustainable growth rate was not used for the efficient management of the assets, which has been linked to a moderate or even depressed level of (after tax) profitability.
The relevant value drivers (sales growth rate, operating profit margin, asset intensity ratio) such as indicators of growth, fluctuated wildly.