BayWa confirms significant increase in earnings for 2019

Press Release

BayWa confirms significant increase in earnings for 2019

Improvement in all core segments

Munich, 7 November 2019 – BayWa AG, Munich, Germany, has successfully completed the first nine months of the financial year 2019. Whereas revenues as at 30 September 2019 climbed slightly to €12.5 billion (Q1-3/2018: €12.2 billion), EBIT increased significantly to €77.3 million (Q1-3/2018: €28.3 million).

All three core segments – Agriculture, Energy and Building Materials – saw improved earnings compared to the same period in the previous year. The Energy Segment recorded particularly positive development, with both Conventional Energy and the renewable energies business achieving a significant improvement in earnings. Conventional Energy benefited from the global oil price trend and an increase in domestic demand for wood pellets. The Renewable Energies business unit further expanded its international activities in the solar and wind plant project business and in solar module trading. Unlike in the previous year, it also sold a few larger plants and systems in the third quarter. The lion’s share of sales is once again scheduled for the fourth quarter of 2019. With more than 650 megawatts (MW) in the sales pipeline, it should be possible to achieve a substantial year-on-year increase in the annual result in the Energy Segment in 2019. “The Renewable Energies business unit will again play a major role in our consolidated earnings in 2019, thereby demonstrating the excellent development of these business activities, which we have spent the past ten years nurturing,” said Klaus Josef Lutz, Chief Executive Officer of BayWa AG.

The Agriculture Segment also posted positive development, with the Global Produce and Agricultural Equipment business units in particular seeing an increase in earnings. Agricultural Equipment recorded consistently high order intake and brisk demand for services. BayWa expects the positive development to continue in both areas in the final quarter of the year. High-quality harvests in the northern hemisphere and the traditional increase in demand for tropical fruits around Christmas should have a positive effect on business, as should the tremendous willingness of farmers to invest to agricultural equipment.

Agricultural trade activities in Germany were also up significantly year on year after the first nine months of 2019. However, lower demand for agricultural inputs, especially fertilizer (on account of the German Fertiliser Application Ordinance), had an impact on earnings as at 30 September 2019, as did declining grain prices and lower margins in grain trading. The international grain trading team at BAST (BayWa Agri Supply & Trade) successfully continued to expand its speciality business activities, even though the subdued demand for standard produce to date and US trade policy limited trading activity at BAST. In the fourth quarter, BayWa expects the speciality business to continue developing as planned. Higher domestic grain inventories offer additional marketing potential in the domestic agriculture business. The weather-related delay in autumn seed-sowing should help to boost demand for agricultural inputs.

The Building Materials Segment grew further and once again saw improved earnings year on year. BayWa intends to continue benefiting from the brisk construction activity and the expansion of its project activities.

All told, BayWa expects the positive development to persist throughout the rest of the financial year 2019 with the effect of significantly increasing the consolidated earnings for 2019 as planned.

Agriculture Segment: development mixed
The Agriculture Segment saw mixed development in the period leading up to 30 September 2019. In international grain trading, trade tensions led to a decline in exports at BAST and impacted earnings in the business unit, as did the lower demand for feedstuffs compared to the same period in the previous year, during which BAST benefited from the drought-related shortage in staple feed. The Agri Trade & Service business unit secured its improvement in earnings thanks to higher grain recording volume and the strong first half of 2019. At the same time, the market conditions for the domestic agricultural input trade remained difficult, primarily due to the stricter regulations on the use of fertilizers and the decline in rapeseed cultivation.

Earnings in the Global Produce business unit rose significantly thanks to business within Germany, as the company was able to market the remaining volume of the previous year’s record harvest at good prices and because the new marketing season started with brisk demand. Although this year’s harvest was rather average in terms of volume, it was of significantly higher quality, therefore offering corresponding marketing opportunities in the months ahead. In the international fruit business, T&G Global Limited was successful in the Asia-Pacific market in particular, thanks to specialities such as grapes, berries and citrus fruit.

Earnings in the Agricultural Equipment business unit were significantly higher than planned, even though they did not quite match the record set in 2018, as expected. The business unit benefited not only from a very high propensity to invest among farmers, but also from rising demand from the public sector.

Energy Segment: significant earnings growth
The Energy Segment continued seeing very strong development even after the end of the third quarter. Demand for heating oil continued unabated. Among other factors, market uncertainty following mid-September’s attack on oil facilities in Saudi Arabia led to higher orders. The German federal government’s climate package may also have motivated customers to engage in panic buying. With the relatively low prices encouraging consumers to stock up in advance, the marketing volume of wood pellets also rose. The Renewable Energies business unit further expanded its international project activities and its trading activities involving PV components. The sale of the Les Landes wind farm in France, with an output of 18 MW, was the main factor behind the significant yearon-year rise in earnings as at 30 September 2019. The service business also saw greater capacity utilisation than in the previous year.

Building Materials Segment: higher share of private brands
The segment benefited from strong economic activity in Germany, especially the increased demand in civil engineering and road construction, as well as in gardening and landscaping. The private brands continued to develop very strongly, particularly in gardening and landscaping. Furthermore, order intake on the BayWa Building Materials Online portal nearly doubled year on year. All told, the building materials business outperformed the market in BayWa’s sales regions. In future, BayWa plans to benefit even more strongly from its project business. To this end, BayWa is working with developers and is securing additional building materials sales through digital marketing channels, among other measures.

Innovation & Digitalisation Segment: milestone in cross-vendor digital farming
The Innovation & Digitalisation Segment pools all of the BayWa Group’s activities in Digital Farming and eBusiness. After two years of development, BayWa and its Group company FarmFacts will unveil its new NEXT Machine Management software at this year’s Agritechnica. The software enables compatibility between machinery and equipment from different manufacturers, thereby eliminating one of the greatest barriers farmers face when it comes to investing in digital farming. At Europe’s leading agricultural equipment trade fair, BayWa and its Group companies will also present digital solutions for eco- and crop-friendly fertilization. As anticipated, the segment’s EBIT is negative on account of the extensive investments associated with software development.

Figures 2019