With debt of NIS 250 million, a petition for a stay of proceedings and a significant fall in purchase orders, veteran Israeli agritech company Agrotop would not seem an attractive proposition. Agrotop is one of Israel's veteran agricultural construction and agro-technological project companies with extensive activities not only in Israel but in Europe, Africa, Australia and Asia.
The company's future looked particularly bleak, and real doubt arose as to whether it could be rehabilitated. However, several months after Agrotop Group submitted a petition of stay of proceedings, following which CPA Gabi Trabelsi and Adv. Avner Cohen, were appointed as trustees, the picture looks different. Despite the Covid-19 crisis the company has made handsome profits over the past five years.
Internal audits by the trustees found that the main reason for Agrotop's dismal condition was its entry into ambitious infrastructure projects through its construction division, which undertook to construct engineering projects in the industrial field - in which it has no relative advantage.
At the same time, in the company's traditional field of activity - construction of custom made live-stock buildings including coops, in which it has decades of goodwill and experience, the company continued to generate handsome profits even during the Covid-19 crisis.
Moreover, Agrotop continues to sign new deals for the construction of chicken coops. Two weeks ago the trustees signed an agreement with a Nigerian company to construct four chicken coops, and a new deal to construct a project in Israel worth NIS 6 million
In view of the conclusions of the trustees as to the reasons why "Agrotop" collapsed, as the financial statements of the company show, the Beersheva District Court, where rehabilitation of the Group is taking place, has approved for the trustees to invite the public to submit proposals to purchase the companies, in whole or in part, and to reorganize them. The trustees will initially offer for sale the agricultural activity of the company as well as its rights in land, subject to their regulation, with August 8 as the last date to submit proposals. The trustees believe activity in Agrotop’ and Hapach will increase due to recent agreements between the Ministry of Agriculture and the Ministry of Finance and the poultry farmers to promote reform in Israel's poultry business, requiring a transition to cage-free chicken coops - chicken coops the company is experienced in constructing worldwide.
The second option presented by the trustees is to purchase the rights in the land that the group holds - land zoned for industrial use in the Timorim village covering 21 dunams (5.25 acres) on which an industrial and office building is constructed with about 7,500 square meters that is located in the industrial zone of the village. Such rights are still subject to regulation with the village, most probably by establishing a company in which Timorim holds 26%, pursuant to the requirements of the Israel Land Authority. According to assessments, the value of the rights in the land is worth tens of millions of shekels, and perhaps even more.
The third option proposed by the trustees is to purchase the entire company group, including the rights in land and the activity of the companies in the agricultural field as one whole.
The trustees found that activities in the construction of agricultural projects in the livestock sector, mainly chicken coops, Agrotop accrued profit of about NIS 34 million over the last 5 years. In 2021, revenue was about NIS 66 million with gross profit of about NIS 10.5 million. This despite of the fact that already at that time the company incurred significant financial losses in its non-agricultural fields of activity. In 2018, for example, the sales turnover of the company in the agricultural sector reached a peak of NIS 94 million, while gross profit was almost NIS 20 million and cash flow operating profit was about NIS 13 million.
Agrotop’s parent company, Hapach Metal Industries, also recorded handsome profits in the agricultural sector. In 2021, after the snowball that brought the group into heavy debt already started rolling, the company that engages in upgrading existing chicken coops had a cash flow operating profit of about NIS 3.5 million, with revenue of about NIS 24 million. The company has thus been able to return to its profitability level in 2018 before the Covid-19 crisis broke out.
In total, the activity of the group in the agricultural sector produced total cash flow operating profit of NIS 43.5 million in the last five years. In 2021 (Covid-19) the company produced an operational profit of almost NIS 7 million, and in 2020, the height of the Covid-19 crisis, the company recorded an operating profit of NIS 2.3 million. In 2018, the peak year in activity of the agricultural sector as far as Agrotop was concerned in the last five years, the company recorded gross profit of about NIS 25 million.
Agrotop is active in about 40 countries and builds structures and equipment for livestock farming and industrial agriculture and specializes in construction of cage-free chicken coops for egg laying hens. In 2021 the company implemented projects worth NIS 20 million in the Ivory Coast, including construction of about 62 agricultural centers and executed projects in Israel in the field of chicken coops worth about NIS 24 million. The company also has extensive activity in Australia wherein 2018 Agrotop constructed chicken coops worth NIS 31 million.
The trustees have reported that several Israeli as well as international companies have expressed interest in buying Agrotop and have signed a confidentiality undertaking for promoting the purchase of the agricultural activity of the company.
Published by Globes, Israel business news - en.globes.co.il - on July 26 2022.
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