One advantage Verbio has with all its products is the low cost of production compared with its competitors in western Germany. Farmland is much cheaper in the east than in the western states, and the farms are much bigger in the east allowing large scale production. Some of the land, although not the best quality, can be planted with industrial crops rather than food crops without creating a political backlash.
Besides all this Verbio?s processes are extremely efficient for all its products. All this gives Verbio a huge cost advantage while receiving the same prices for all their products on the market. Verbio could even make money with some of its products without subsidies.
For now the government guarantees prices for some of its products, allowing Verbio to predict its earnings for the next few years. This combination of high margins, cost advantage and guaranteed prices makes the company predictable ? that is excellent profits and low risk. If it could find a way to reproduce this model in the depopulated areas in eastern Germany and Eastern Europe, it would become a high growth company with a high PE (KGV).
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