The international trade and services group BayWa AG, Munich, Germany, finished the first nine months of 2018 with a slight rise in revenues to €12.2 billion (2017: €12.0 billion). With project sales in the Renewable Energies business unit not yet on par with the level seen in the same period in the previous year, earnings before interest and tax (EBIT) were down year on year to €28.3 million as at 30 September 2018 (2017: €90.3 million). Both developments were in line with previous expectations. For the fourth quarter, however, BayWa expects a significant jump in earnings due to the sale of solar parks and wind farms with a total output of around 450 megawatts (MW). The Group therefore stands by its positive outlook for the financial year 2018 regardless of the result after nine months now being presented. BayWa plans to achieve Group EBIT on par with the previous year, thereby balancing out the non-recurring effect from 2017 of roughly €20 million from the sale of the corporate headquarters, at least on an operative level.
All told, the Chief Executive Officer of BayWa AG, Klaus Josef Lutz, seemed satisfied with the development after nine months. International trade in grain and oilseed, as well as the Agricultural Equipment business in Germany and Austria, performed very well, he said, adding that this positive development at the international level was more than able to compensate for the declines in German agribusiness. “The grain recording and operating resources business in Germany has suffered from the continued drought in recent months. We are experiencing one of the most difficult agricultural years in the past 50 years here, which demonstrates once again how important the internationalisation of BayWa and our agribusiness are,” Klaus Josef Lutz explained. The positive development in the Building Materials Segment, which has been able to further increase sales on account of the healthy economy, should continue until the end of 2018, according to Lutz.
Agriculture: International grain trading benefits from wheat rally
The Agriculture Segment1 was heavily influenced by two different developments in the first nine months of 2018. Thanks to the Group’s existing trade contracts and inventories, the international trade in grain and oilseed benefited significantly from the marked rally in the price of wheat that began in July and August 2018 owing to the anticipated declines in harvest yields. The drought-related staple feed shortage also led to a significant increase in demand for feed grain that the Dutch Group company Cefetra was able to meet, thereby having a positive impact on EBIT. By contrast, domestic agricultural trade sold fewer operating resources due to the extreme drought and saw lower grain recording volume as a result of the below-average harvest in Germany. Furthermore, a sharp rise in logistics costs on account of rivers’ low water levels weighed down results in the Agri Trade & Service business unit.
The international fruit business continued to develop positively but was unable to balance out the consequences of the extremely low 2017 apple harvest in Germany and the resulting lack of marketing volumes for the current financial year. However, BayWa expects recovery effects in fruit trading between now and the end of the year due to the upcoming Christmas business with tropical fruits as well as the asparagus and grape trading activities of the New Zealand Group company T&G Global Limited.
The decidedly positive development in the Agricultural Equipment business unit was due to a significant increase in demand in Austria, where new products were introduced. In Germany, sales of Fendt harvesting machinery and the corresponding demand for services continued to increase.
Renewable Energies develop as planned
With regard to conventional energy, the Energy Segment2 was influenced by rising oil prices and the correspondingly low sales of heating oil. However, with the start of the heating period, we assume that demand for heating oil will rise again.
The Renewable Energies business unit will make up significant ground before the end of the year: While in the previous year wind and solar parks with a total output of around 250 MW had been sold in the first nine months, so far, as expected, total project sales total just 47 MW in 2018. That has had a corresponding effect on EBIT in the Energy Segment. “The plan envisages global sales of further projects with a total output of around 450 MW between now and the end of the year. We therefore expect to exceed the previous year’s result in Renewable Energies,” explains Chief Executive Officer Klaus Josef Lutz.
Building Materials: Revenue growth in the first half of the year expanded
Due to the continuing dry, warm weather, the Building Materials Segment3 was able to further expand the revenue growth achieved in the first half of the year. The ongoing positive situation in the construction sector, above all in civil engineering and infrastructure construction, resulted in strong demand across the range, including for own brands. Assuming that there is no extreme deterioration in the weather, BayWa expects the overall positive development to continue in the final quarter.
Innovation & Digitalisation increases revenues
After nine months of the current year, the Innovation & Digitalisation Segment4 has achieved a significant increase in revenues compared to the same period in the previous year. That is due to the expansion of the product range, the international extension of sales and strong growth in the number of new customers. There was a particular rise in sales of the farm management software “NEXT Farming Office” including service contracts. Demand for digital advisory services, which primarily include the creation of satellite-based map material and the soil sampling service, also increased significantly. However, EBIT in this segment does not reflect that growth, because investment, above all in innovative digital farming solutions, was increased as planned, compared to the same period in the previous year. Accordingly, the segment reported negative EBIT below the level achieved in the previous year in the reporting period.
1 As of 1 January 2018 the sales activities of the BAST (BayWa Agri Supply & Trade) business unit were transferred to the BAV (BayWa Agricultural Sales) business unit. In the course of these efforts, the BAV business unit was renamed Agri Trade & Service business unit. The BAST business unit comprises international grain and oilseed trading activities, while the Agri Trade & Service business unit handles domestic agricultural trading. The Fruit business unit was renamed Global Produce as of 1 January 2018.
2 The Energy Segment comprises the BayWa Group’s trading activities in fossil and renewable heating fuels, fuels and lubricants, as well as its business in renewable energies, which is pooled in BayWa r.e. renewable energy GmbH.
3 The Building Materials Segment mainly comprises Group trading activities involving building materials in Austria and Germany.
4 The new Innovation & Digitalisation Segment, which was set up in the second half of 2016, pools all of the BayWa Group’s digital farming and eBusiness activities.
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