DGI strangles Agricorp, taxes eat away profits and millions of dollars in losses

Over the past year, AgriCorp’s sales have increased, its expenses have decreased and overall the company and its two subsidiaries have been more efficient. This allowed them to record a pre-tax profit of 259.16 million cordobas (about $7.1 million). However, the commitment made to the Directorate General of Revenue (DGI) to pay all 2023 taxes, as well as the millionaire’s share of the amount that is allegedly owed in past taxes, turned that profit into a loss of 421.77 million cordobas. The equivalent of approximately $11.6 million.

This would be the second time the company closed the year with a loss since 2015, when it began recording a decline in its profits, which rose from approximately 216 million cordobas to less than 10 million cordobas. For the first time in 2020, it suffered a loss of about $1.1 million.

On that occasion, the lack of profits was mainly due to the poor performance of one of its three subsidiaries, Industria San Francisco, which produced and marketed the eggs. Eventually, AgriCorp sold that company last year and was left with only two subsidiaries: Nikasal, which produces and markets the salt, and IP Management, which is not known.

The sale of the poultry company was supposed to end the company’s financial problems, but the Directorate General of Revenue (DGI) charged 366.43 million cordobas (about $10.01 million) as payment of income tax. The annual 3 per cent fixed minimum payment (PMD) applies to gross taxable income between 2012 and 2022.

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Over $20 million in taxes

The $10.01 million fee that DGI charged last year is in addition to the 394.50 million cordobas (about $10.77 million) that AgriCorp had already paid under the simplified fixed stop arrangement for transactions on agricultural exchanges. On the basis of which the tax concertation law is established and its reform.

Furthermore, the DGI established that the company would pay one hundred percent of the price maintenance and 3 percent of the fixed minimum payment for each fiscal year. Although they initially appealed to the Supreme Court (CSJ), they later gave up and reached a payment arrangement. He paid the first installment in November and promised to pay the others in December and May, and to continue paying in installments until the loan was repaid.

However, AgriCorp has assured that it has been restructured and has the necessary funds to meet its commitments to DGI. In addition, Grain Hill Corporation SA, the company that owns Agri-Corp, invested seven million dollars in the purchase of preferred shares of the company. It has also requested to extend the duration of its long-term financial commitments.

Agricorp sales increased

Through a report of relevant facts, Agricultural Corporation SA (AgriCorp) informed holders of its stock instruments that last year it recorded net sales of $256.8 million, which was $24.3 million more than 2022 sales. , Increase of 10.5 percent.

“In 2023, sales of pure rice increased by 11.8 percent; Wheat flour represented 18.0 percent and food and beverages (pasta, cookies, corn flour, bakery supplies and salt, among other products), 27.3 percent,” the company reported. Additionally, he says as part of a strategy for growth in consumer products, last year they introduced beer to their product catalog and it contributed $1.9 million to annual sales.

But not only sales increased last year. According to the report, while net sales increased by 10.5 per cent, cost of sales increased by 10.7 per cent due to inflationary increase in production costs. But despite this increase, the company’s gross profit increased by 8.9 percent. Furthermore, the company was more efficient, the growth of its operating expenses was less than that of net sales.

“Based on this ratio of expenses to sales, operating expenses decreased by $541 thousand… this was due to greater efficiencies in supply chain expenses and administrative expenses,” the report said.

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US$7.1 million profit

According to the report, this improvement in performance has led to earnings before interest, taxes, depreciation and amortization (EBITDA) of $16.9 million in 2023, approximately $1.6 million more than in 2022, representing an increase of 10.5 percent. Is. This means that Agri-Corp and subsidiaries generate more value for the business,” says part of the relevant facts report published for interested parties on the web portal of the Nicaraguan Stock Exchange (BVN).

EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) is a financial indicator that shows companies’ profits before subtracting interest paid on loans, taxes and depreciation due to losses.

The company also cut its financial, foreign exchange and other expenses. it’s all allowed profit before taxes There will be a total of 259.16 million cordobas, which is equivalent to approximately 7.1 million dollars, That is, the same profit as the company had received before 2015, when its financial problems began.

Moreover, the profits that AgriCorp recorded last year are $2.5 million higher than the profits recorded in 2022, which represents an increase of 54.2 percent.

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Loss of US$11.6 million

Although greater efficiency allowed it to accumulate these million-dollar profits, the amount was not enough to meet the company’s financial commitments. By providing for 678.79 million cordobas (approximately $18.53 million) paid in income tax (IR), the company generated a deficit of 419.62 million cordobas (approximately $11.6 million) which turned into a loss.

Given this situation, the Company informed holders of its stock instruments that, as announced on February 6, 2024, Agri-Corp will enter into an additional obligation to pay income taxes for the years 2019 to 2022. Is. The greater obligation to pay the full 3 percent fixed minimum payment for 2023. The amount of this liability and monetary translation adjustments total $13.8 million.

“In accordance with International Financial Reporting Standards (IFRS), this amount should be adjusted according to the results of 2023. As a result, the adjusted consolidated profit/loss of Agri-Corp and subsidiaries became -$11.6 million, thus not being able to reach the estimated profit of $747 thousand,” the report says about the relevant facts.

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Owners buy shares of Agricorp

However, the company assures that it is structured and has sources of non-operating funds that will allow it to comply in the long term with the tax obligations it has assumed. In addition, Grain Hill Corporation SA, the company that owns Agri-Corp, invested $7 million in the purchase of preferred shares of the company.

In the report of relevant events, the company has also announced that it has adopted banking procedures to extend the term of long-term loans, and that it will not have the assets necessary to run its operations.

“With these funds, the company will pay the above mentioned balance over a long period of time without impacting the management and future operating flows of the business. Similarly, Agri-Corp has adjusted sales volumes and margins to meet the subsequent annual payment of 3 per cent of final minimum payment (PMD), without impacting its obligations towards investors and creditors.

AgriCorp began operations on 1 May 2000 following a merger between rice marketing companies, Comercial Centroamericana de Inversiones, SA (Comersa) and Industrias Nationales Agrícolas (INA). Although he has always been associated with this company with presidential advisor Bayardo Arce, the people who have always stood out as partners are his wife Amelia Ybarra and his brother-in-law. In fact, one of them, Amilcar Ybarra, has always acted as legal representative and president of the company, but there are other shareholders as well.