Rural SMEs say growth has peaked - survey

15 October 2014

AGRIBUSINESS SMES PREPARE FOR BELT TIGHTENING
Positive 2014 unlikely to extend into next year

Tightening conditions on global commodity markets have not come out of the blue for New Zealand’s SME agribusiness sector, as the majority believe growth has peaked, according to a survey of business owners and managers throughout the country.

The latest MYOB Business Monitor survey of over 1,000 business owners and operators nationwide, conducted by Colmar Brunton, saw SMEs in the agriculture, forestry and fishing sector reporting above average growth in the year to August 2014. Around 14% of the businesses included in the research were part of the agribusiness sector.

Despite enjoying a solid year of growth in 2014, few expect those conditions to continue into the next year. According to the survey, just 17% of agribusiness SME operators forecast revenue to increase in the year to September 2015, compared to an SME average of 38%. The number expecting revenue to fall is higher, 18% compared to just 11% overall, while 19% are uncertain what 2015 will bring.

MYOB NZ Sales Manager Business Division Scott Gardiner says the survey highlights that many in the agribusiness community have been expecting the market to change, and can be expected to be making plans to consolidate in 2015.

“What’s very interesting about this research is when we look at both the revenue forecasts and the pressures the sector is facing, we see the industry expecting markets to come off their recent highs.

“While their fellow business operators in the SME community are still fairly bullish on 2015, most in the agribusiness sector believe their growth has peaked this year. This would make it likely that agribusinesses are making a sensible adjustment for changing conditions,” he said.

Financial pressures coming on
Mr Gardiner says the key pressures expected by agribusiness operators are also telling. “Other than the cost of fuel, which is a constant pressure for the industry, we are seeing businesses forecasting growing pressure around the high dollar, the cost of borrowing and cash flow,” says Scott Gardiner.

“These are the areas we would expect to see pressure increasing as market conditions change,” he added.

“Hopefully the Reserve Bank’s recent intervention in the dollar will be providing some relief for the rural community. Good managers will be looking at these indicators now and working on making adjustments in their business to cope with increasing pressures.”

2015 pressures on agribusiness SMEs:

1. Fuel prices – 36% (26% all SMEs)
2. Exchange rate – 32% (14%)
3. Cash flow – 26% (19%)
4. Price margins – 23% (17%)
5. Interest rates – 23% (21%)

Investing in people
Although preparing for lower revenue levels in the coming year, agribusiness operators are still looking to pass on some of their recent earnings to their staff, with over a quarter (26%) intending to increase pay rates in 2015. Wage growth in the industry is likely to be significantly higher than other sectors, with 20% of all SMEs intending to increase the amount they pay staff in 2015.

More full time jobs will also be available in rural New Zealand, with 10% of businesses intending to increase their headcount in 2015, though only 5% will increase the number of part time roles (13% SME average).To offset some of that cost, a quarter of local agribusiness SMEs plan to increase their prices in 2015.

Low online engagement
New Zealand’s agribusinesses have the lowest level of online presence in the country, with 68% not operating a business website or social media site, compared to 47% of all SMEs. Internet access remains an issue for the sector, with 36% dissatisfied with access (speed and reliability) and the same proportion (36%) unhappy with the cost of their internet plan.

“Although New Zealand’s agribusiness operators are seeing some of the shine come off their markets in the next 12 months, what is heartening about this survey is, as well as achieving above average results in 2014, local operators appear to be aware well in advance of the possibility of the market changing,” says Scott Gardiner.

“What’s particularly good to see is around 17 per cent of agribusiness operators will increase the amount of work they do with their business advisors in the next 12 months. With pressures increasing, getting the right help can make all the difference.

“New Zealand remains fundamentally an agribusiness economy. What that means in the 21st Century, though, is a diverse range of businesses connected through every layer of industry – from education and research, to ICT – and every part of the country. For the benefit of the whole economy, it is good news that our agribusiness owners and managers are planning prudently for the year ahead.”

For MYOB product information, research results, business tips, discussions, client service and more visit the MYOB website, or its blog, LinkedIn, Twitter, Facebook, Instagram and YouTube sites.

About MYOB
Established in 1991, MYOB is New Zealand’s leading accounting software provider. It makes life easier for approx. 1.2 million businesses across New Zealand and Australia, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory, mobile payments and more. MYOB also provides ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and now spends NZ$35+ million annually on research and development. For more information, visit myob.co.nz.

About the MYOB Business Monitor
The MYOB Business Monitor is a national survey of 1,000+ New Zealand small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. It has run since 2009, commissioned to independent market research firm Colmar Brunton. This most recent survey ran in July/August 2014. The Monitor researches business performance and attitudes in areas such as profitability, cash flow, pipeline, technology usage and the government. The weighting of respondents by both geographical location and sector is based on overall market proportions as established by Statistics New Zealand and is drawn from an independent survey group, which includes both MYOB clients and non-clients.

ENDS

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