Agricultural machinery industry growth engine: harvest cash flow!

We recently took a look at some of the European Agricultural Machinery Association (CEMU)’s monthly Business Barometer reports. Although the “agricultural machinery industry as a whole experienced a steady growth from 2021 to 2023, a decline is expected in 2024 for up to -10% of the market volume.” [1] The trends are gloomy but by the end of this article we hope you’ll find some hope! 

The first thing that jumped out are the link titles for the past few months’ Business Baromoeter reports. Have a look here [2]: 

• “Current business has further deteriorated” (April 2024)
• “Current business has reached a new low” (March 2024)
• “Business climate continues to be in deep recession” (February 2024)
• “Business climate in deep recession” (January 2024)

Digging into the reports, we’ve discovered some insights on the agricultural machinery industry that we’d love to share with you. 

Current business outlook and turnover expectations cloudy

According to the April 2024 CEMU Business Barometer report [3], companies in the agricultural machinery sector are not particularly positive about their current business. 16% view their current business to be very unfavourable – up from 12% in February. An eye-opening 47% view their current business to be unfavourable – up from 43% in February. Only 5% consider their current business to be good – down from 9% in February.

What about turnover? Very little sunshine there, too! Over the next 6 months, 66% expect their turnover to go down – that’s no change from February. One ray of light is this: 11% expect it to grow – up from 9% in February.

Employment forecast – a storm’s a-brewin’

The forecast for employment in the agricultural machinery industry is fairly stormy. 58% plan to reduce their temporary employees while 20% plan to reduce their regular workforce. 6% would increase temporary workers while 9% would increase regular workers. 36% would leave their temporary workforce unchanged while 71% would leave their regular workforce unchanged.

Dealer stocks stuck in the past

Regarding orders and dealer stocks, the report states this: “The survey confirms again that the direct customers of the manufacturers, the dealers, are not able to pass on their numerous orders from the past to the end customers. According to the survey, the dealer stocks are in most European markets significantly higher than in the year 2019, which went down in history due to high dealer stock levels.”

Tractors – mixed news

Tractor registrations in 2023 in Europe was led by France (23%), Germany (18%), and Italy (11%). France provides good news as agriculture tractor registration went up by 2% compared to 2022. Germany, as well, delivers some good news, holding “at the same at the same good level as in the previous year” but slowed down in the second half.

Italy, however, demonstrates a struggle as the market declined 13% year-on-year. Spain, Poland, and Belgium all take a dip while the UK and the Netherlands show small increases. [4] 

B2B BNPL for agricultural machinery – sunnier pastures ahead

Innovative financial solutions are more crucial than ever for a healthy agricultural machinery industry in Europe. Digital transformation [5] is becoming a key to success in European agriculture – and we see no reason why this should not apply to trade finance for agricultural machinery, too!

Quite the opposite: digital trade finance tools that supply agreeable payment terms like B2B Buy Now, Pay Later (BNPL) can be a key tool for success. Here is where Terms.Tech can shine a ray of hope.

Stabilising financial health

With the anticipated downturn in market volume and businesses facing an increasingly unfavourable environment, maintaining financial stability is paramount.

TermsTech provides payment terms via its Buy Now, Pay Later (BNPL) solution tailored for the B2B sector. This payment solution can be especially useful for manufacturers and dealers operating in agricultural machinery.

By adopting BNPL, businesses can buffer the impact of fluctuating sales and safeguard their financial health. This model allows businesses to manage (i.e. both offer and receive) payment terms effectively, thereby minimising credit risk and enhancing financial predictability.

Boosting sales in a sluggish market

In the midst of declining turnover expectations and a gloomy employment forecast, the flexibility of a BNPL option can be a decisive factor for buyers. Terms.Tech empowers dealers to offer more flexible payment solutions to their clients. This is especially crucial in an industry where upfront costs for high-value machinery can deter potential buyers.

With BNPL, dealers can remove significant financial barriers, making it easier for farmers and agricultural enterprises to invest in necessary machinery without the burden of immediate large-scale expenditure.

Enhancing cash flow management for buyers

Cash flow is king in the agricultural sector, where the timing of income can be as unpredictable as the weather. TermsTech helps buyers manage their cash flow more effectively by providing the option to stagger payments according to their financial capacity and seasonal cash flow patterns. This not only aids in better financial planning but also ensures that investments in essential machinery do not wait.

Whether it’s upgrading their tractors or expanding their fleet of harvesters, buyers can proceed without the pressure of using their own treasury and depleting their funds, which may be needed elsewhere during the lean seasons.

How B2B BNPL help your agricultural machinery business?

The agricultural machinery industry landscape is daunting, but with the strategic application of TermsTech’s BNPL solutions, companies can weather this storm.

By enhancing financial flexibility, reducing risk, and encouraging investment, we pave the way towards not just survival, but thriving in these challenging times.

What can you do to increase the potential for success?

Get in touch with us today to discover how TermsTech can improve your cash flow and enable more transactions with your customers.

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