Weak rouble widens losses at major Deere dealer

Ekotechnika, one of the biggest John Deere dealers, blamed a weak rouble for a doubling in first-half losses, flagging too "more difficult financing conditions" for growers stemming from the fallout from the Ukraine crisis.

The group, whose Ekoniva Technika operating subsidiary is responsible for one-quarter of sales of John Deere equipment in Russia as of 2012, revealed a net loss of E10.6m for the October-to-March period, compared with a loss of E5.6m a year before.

The increase reflected an 8.6% drop to E65.1m in sales which was "exclusively attributable to exchange rate effects", Ekotechnika said.

"The company's sales in roubles were about 5% higher in the period," said Ekotechnika, which is based in Germany.

"Exchange rate effects on the operational activities of Ekotechnika were negative, as the value of the rouble has continued to decline," averaging 46.09 roubles to E1 during the six-month period, compared with 40.25 roubles a year before.

'Farmers must invest'

Indeed, revenues from farm equipment sales, of which John Deere equipment comprises about two-thirds, showed a decline of some 18% to E48.2m.

However, sales from spare parts showed a "clearly positive trend", soaring 56% to E13.4m, with revenues from servicing up by some 24% at E2.6m.

And Ekotechnika managing director Wolfnang Blasi said that the group remained upbeat on prospects for Russia's farm machinery market.

To reach a Russian government goal of 85% self-sufficiency in agricultural commodities, "farmers must continue to invest in highly efficient agricultural machinery.

"While the situation in 2014 is clearly dominated by the weakness of the rouble and the more difficult financing conditions for farmers resulting from the Ukraine crisis, the medium-term outlook of Russia's agricultural machinery market remains positive."

'Worried by high indebtedness'

The tricky credit conditions in Russia, besides Ukraine, have been well documented.

As of mid-May, Russian farmers "were able to borrow only 75bn roubles ($2bn) for spring sowing and spring field works, which is 11% less than last year", according to a US Department of Agriculture report.

"The banks are worried by farmers' high indebtedness and the growth of delinquent loans."

The number of non-performing loans held by state-owned Rosagroleasing which allows farmers to buy equipment on instalments at subsidised interest costs has reached 25bn roubles ($700m).

Nonetheless, Russia's farm equipment market has held up well, with sales of tractors up 12.2% in the first four months of 2014, and combine sales down 4.9%, according to industry group Rosagromash.

In the US, tractor sales were up 3.7% and combine sales down 8.2% during the same period, according to the Association of Equipment Manufacturers.

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