BayWa financial year 2018
WindSolarBioenergyServicesSolar DistributionEnergy TradeEnergy Solutions
International trading and services group BayWa AG increased its revenues to €16.6 billion in the financial year 2018 (2017: €16.1 billion). EBIT came to €172.4 million in the financial year (2017: €171.3 million). By increasing earnings across all of the Group’s operating segments, BayWa was able to achieve its targets for the year and compensate for the previous year’s positive one-off effects of around €20 million. The company intends to pay a stable dividend for 2018 of 90 cents per share (2017: 90 cents).
“The Agriculture Segment improved above all thanks to extremely positive development in international trading and agricultural equipment business,” explains CEO Klaus Josef Lutz. The significant increase in earnings in this segment, Lutz said, was a particularly important achievement, as the German agricultural industry once again suffered due to extremely dry weather through the summer of 2018.
The Energy Segment also performed excellently in 2018: “Both conventional energy business and the Renewable Energies business unit reached new record highs,” Lutz continued, adding that building materials business also continued to develop positively at the Group.
The CEO was satisfied with the targets for the year being achieved, including compensating for the one-off effects of the sale of the company headquarters in Munich through operating improvements. He also believes further growth will be forthcoming due to acquisitions of speciality providers in the international agricultural trade industry over the past few years. Strengthening sales activities should also see results in international fruit trading business rise in 2019. The same applies to renewable energies, which are set to continue on their growth course this year.
Lutz also expects significant increases in earnings in German agricultural trade activities, assuming average weather conditions and vegetation development. Conditions are particularly important in the first half of the year, as grain inventories are only starting to be delivered now due to the low water levels at the end of last year. In addition, Lutz believes that demand for feed will also be high due to the current lack of staple feed. The CEO believes that agricultural equipment and conventional energy business will also progress well in the financial year 2019, even if EBIT does not quite manage to reach the new records set in 2018. According to Lutz, the Building Materials Segment will continue its stable development: “All in all we want to generate a significant year-on-year improvement in our results in 2019,” Lutz said. BayWa expects its Q1 2019 result to be considerably better than the previous year.
The CEO also explained that BayWa will be looking to integrate a “green perspective” into its business strategies and models to a much greater and more-targeted extent moving forward: “The impact of climate change presents the greatest challenge in our history as a society and therefore for us as a company too,” Lutz said. BayWa is building on a solid basis in this respect, as Lutz points out. The Renewable Energies business unit is just one example, as are digitalisation solutions to boost efficiency in the use of fertilisers or water. “By adding this ‘green perspective’ to our business, we want to find answers to the question of how to continue to develop in a sustainable and environmentally friendly manner as a business,” Lutz explained.
Agriculture Segment significantly increases EBIT
Revenues in the Agriculture Segment rose to €11.0 billion (2017: €10.8 billion) in 2018. EBIT climbed significantly by almost €20 million to €100.1 million (2017: €82.1 million).
The BayWa Agri Supply & Trade (BAST) business unit benefited from two developments in particular in 2018: The scarcity of staple feed caused by the dry weather saw demand for soya from the feed industry rise, which in turn was able to be met by Dutch Group company Cefetra B.V. In addition, the shift in the global flow of goods from the US to Brazil as a result of Chinese import duties on US soya benefited the existing trading positions. Thanks to existing trading contracts and inventories, the Group was also able to hold its ground when faced by rallying wheat prices last summer caused by the anticipated declines in harvest volumes in Europe.
The Agri Trade & Service business unit and its trade, agricultural input and recording business, on the other hand, was impacted by the extremely dry weather during the year. Business activities in Germany and Austria were hampered to a considerable extent by a number of different aspects, including a significant decline in grain recording volumes due to unusually low harvests caused by the drought, major marketing problems on account of low water levels in rivers and the considerable decrease in fertiliser application due to vegetation development. In addition, a huge rise in low-water surcharges and a lack of drying income also had a negative effect.
The Global Produce business unit (formerly: Fruit business unit) experienced inconsistent development in 2018. New Zealand Group company T&G Global Limited (T&G) was able to boost its sales of apples and pears, while Dutch Group company TFC Holland B.V. benefited from higher sales of berries, stone fruit and tropical fruit. By contrast, dessert pome fruit volume was down more than 50% year on year in Germany due to the poor harvest in 2017. The Global Produce business unit was unable to match the previous year's results despite the positive development of international activities. This was primarily due to the trade war between the US and China, with US apples originally destined for export to China having to be sold in the US at much lower prices than anticipated due to Chinese import duties.
By contrast, the Agricultural Equipment business unit set a new record for earnings in 2018. This was predominantly the result of a major upturn in business involving new tractors, which also boosted service business and spare parts sales. At the end of the financial year, agricultural equipment business recorded unusually high sales of new machinery due to the mild weather conditions, enabling the business unit to generate significantly higher earnings than expected.
Energy Segment develops extremely well
The Energy Segment once again generated new record revenues and EBIT in 2018. Revenues came to €4.0 billion (2017: €3.6 billion), while EBIT rose to €96.0 million (2017: €85.0 million). The Renewable Energies business unit once again saw highly positive development in 2018 and fully implemented the project developments and sales planned for the year as a whole. All in all, facilities with a total installed output of 453 megawatts (MW) were sold, almost 40 MW more than in 2017. The majority of these facilities were solar plants, which accounted for 324 MW. A total of 116.7 MW of wind plants were sold. Trade involving solar modules also developed extremely positively, primarily as a result of expansion into South America and the Asia-Pacific region.
Conventional energy business also generated new record earnings in 2018, up 27% on the previous year. The main reasons behind this rise were improved margins in the fuel business resulting from a tense supply situation and marked price increases in Germany in the wake of rivers’ low water levels and the stoppage at the Bayernoil refinery in the second half of the year. In this environment, the BayWa Group was able to benefit from long-term supply contracts and its extremely efficient logistics fleet. Business with wood pellets continued to develop positively and saw sales up by 1.4%, which was once again above the average for the market. Heat contracting business also developed positively with the acquisition of new properties.
Building Materials Segment remains on course in 2018
Revenues in the Building Materials Segment stood at €1.6 billion in 2018 (2017: €1.6 billion), while EBIT improved slightly to €31.1 million (2017: €30.1 million). Building materials trade in Germany and Austria benefited from positive economic development throughout the year and mild weather lasting into December. High capacity utilisation, particularly in the German construction industry, resulted in transport capacity bottlenecks and long waiting times for deliveries from building materials manufacturers, but BayWa succeeded in growing at a faster pace than the market thanks to its location infrastructure, high availability of goods and high-performance in-house logistics capacities. Linking digital and bricks-and-mortar retail, as well as developing the healthy building and modernisation offering, were important focal points in the development of this business unit. This paved the way for significant expansion, particularly in terms of online sales to private customers. BayWa continued to develop its BauGesund partnership programme, in which commercial customers are advised and trained on the basis of the roughly 6,000 tested low-emission products with the BauGesund seal. Demand in conventional drop shipment business for civil engineering and road construction product ranges also rose, buoyed by increasing public-sector works to repair and modernise road infrastructure.
Significant rise in revenues in the Innovation & Digitalisation Segment
The Innovation & Digitalisation Segment pools all of the BayWa Group's activities in the fields of Digital Farming and eBusiness. BayWa’s eBusiness brings together all of the Group's online activities. However, the revenues and income from the activities are attributed to the business unit or segment responsible for the respective sold product. As a result, investments in the development of digital farming solutions and the provision and further development of the BayWa Portal do not directly lead to income.
In 2018, the segment was able to increase its revenues to €10.7 million (2017: €6.9 million). Research and development expenses in the area of digitalisation resulted in EBIT of minus €12.3 million (2017: minus €10.8 million).
The segment was able to position itself well on the market in the reporting year with its digital farming and farm management products and the NEXT Farming OFFICE software package thanks to requirements optimising fertiliser volumes and implementing stricter documentation obligations under the German Fertiliser Application Ordinance (DüV). Sales figures rose significantly. At 49%, the largest share of revenues came from software licences and software maintenance contracts, followed by digital map material, including analyses and advice, and soil sampling, with a share of 34%.