NADEC reviewing agriculture business plan, time needed to assess VAT hike impact: CEO

National Agricultural Development Co. (NADEC) is reviewing its entire business plan for the agriculture business, CEO Steen Hadsbjerg told Argaam in an exclusive on Thursday.

“We will focus on increasing vegetables and fruit production and increasing production of red meat,” he said, adding further guidance to the market will be released very soon.

NADEC’s Q2 2020 net profit was boosted by ownership of used land areas, compared to a one-off negative impact in Q2 2019 due to unwinding of derivative contracts.

The company needs time to assess the real impact of the value-added tax (VAT) hike after 6 months of implementation.

Moreover, Hadsbjerg noted that he expects a certain level of volume (not value) to decline, adding this was factored in the company’s forecasts.

NADEC maintained revenue in at the same range as before, through active mix and stock-keeping unit (SKU) management to drive value in price per liter.

VAT implementation around the world leads to short term inflationary pressures and change in spending habits. The trend usually stabilizes after six months. Accordingly, the economic indicators rally to pre-VAT levels after 12 months.

On the issue of elimination of subsidy on imported feed, Hadsbjerg explained that this removal took place at the end of 2019 and as mentioned in the announcement, since then, the company has launched active cost management and transformation programs, which have largely offset the impact of the subsidy removal within 2020.

“From 2021 onward, we have certain strategic initiatives which will go into effect and are likely to drive enhanced value for the shareholder despite the subsidy impact,” the CEO added.

NADEC posted a net profit after Zakat and tax of SAR 149.8 million for H1 2020 compared to SAR 3.4 million in the year-earlier period.