Abstract
Agricultural Firms operating in the aquaculture sector in Italy are often characterized by high investment and high capital intensity. In fact, these companies need to develop structures and breeding systems to generate adequate cash flow to repay their investment in fixed assets. In addition, the biological cycle of breeding further extends the need for capital, in this case to finance working capital. There is therefore often a mismatch between the economic and financial cycles, wherein profit margins may differ from financial margins. In this way, such companies have an economic advantage but no sustainable financial cycle. In these cases, several crisis may force companies to default, especially when firns are unable to cover debt repayment. This difficulty is particularly present in Italy, where aquaculture firms are often Small and Medium Enterprises (SMEs) and therefore have greater difficulty than large companies accessing the capital market. Our research evaluates the cost effectiveness and financial sustainability of a sample of forty firms operating in the aquaculture sector in Italy, within a timespan of five years, through comparative analysis of the economic and financial margins. The analysis shows that such firms are capital intensive (TA/VP of median value is 1.16%). Financial debt emerges as the first source of capital then increasing companiesâ financial dependence through credit systems and borrowing costs. Firms have a particular absorption in the NWC cycle, with I_DAYS being 143.29 days, AR_DAYS being 72.75 and 145.51 AP_DAYS expressing financial operating cycle (I_DAYS + AR_DAYS - AP_DAYS) with a length of 70.53 days. Profit margins, even if they are correlated with financial margins, are lower on average. The research highlights that economic model worst explains FCFE (F = 0.011 and adjusted R2 = 0.803), while the financial model best explains FCFE (F = 0.000 and adjusted R2 = 0.922). Our research will be further developed through analyzing cooperatives, unincorporated partnerships and sole proprietorships. It may also be useful to undertake a comparative analysis of aquaculture firms operating in other countries of the Mediterranean basin.
Highlights
The world of aquaculture production has increased in recent decades and between 2003 and 2012, world production almost doubled from 32 to 63 million tons, with about 90% of production currently located in Asia
We considered a total of 200 firm-year data with no missing data in the database
The analysis shows that the sample firms are not able to meet their financial commitments and repay the cost of debt; it is this median value of Free Cash Flow to Equity (FCFE)
Summary
The world of aquaculture production has increased in recent decades and between 2003 and 2012, world production almost doubled from 32 to 63 million tons, with about 90% of production currently located in Asia. The Italian productive structure is characterized by business systems that differ by management type, production cycle and geographic location. The increase in production, which has characterized national aquaculture over the past fifty years, has been supported mainly by the development of production tanks, accompanied by a continuous update of traditional farming techniques. In Italy in 2013, 8,427 companies were active in the fishing sector, with 3,393 aquaculture firms, of which 1,426 were in the Veneto region and 1,138 in Emilia-Romagna. Aquaculture firms are localized mainly in Northern Italy, there are important companies in the south, especially in Sicily, characterized by satisfactory economic performance (Santulli and Modica, 2009; Di Trapani et al, 2014). As aquaculture takes the form of fish farming or cultivation, different from simple “capture” or “collection,” it is considered a form of agriculture regardless of whether it is implemented inland (fresh or brackish) or in marine waters (both onshore and offshore plants)
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