DGAP-News: BayWa AG (vink. NA)

BayWa Performs Much Better in the First Half of 2017 - Further Increase Expected

BayWa AG, Munich, Germany, successfully closed the first half of 2017, recording increases in revenues and EBIT: Earnings before interest and tax (EBIT) increased significantly year on year to EUR72.8 million (2016: EUR55.3 million), and revenues rose to approximately EUR8 billion (2016: approximately EUR7.5 billion). As a result of the expected revival in agricultural trading, farmers' greater willingness to invest and generally positive economic data, BayWa expects to further increase revenues and EBIT year on year in the second half of 2017.

"Earnings were mainly driven by the Renewable Energies business sector in the first half of the year. The Agricultural Equipment and Building Materials business units also turned in a very pleasing performance," said Klaus Josef Lutz, Chief Executive Officer of BayWa AG. At the end of the first six months of 2017, Renewable Energies recorded a year-on-year EBIT increase of approximately EUR26 million to more than EUR41 million. Agricultural Equipment saw EBIT rise sharply in the current financial year, from a negative figure in the first half of 2016 to a positive result of in excess of EUR9 million. "A very positive development that shows just how well-positioned BayWa is here, meaning that BayWa can once again benefit from farmers' greater willingness to invest," Lutz said. The Building Materials Segment also profited from the economic upswing, boosting EBIT to almost EUR7 million.
Global agricultural trade, on the other hand, has not yet been able to match the previous year's figures. This was due, in part, to the restructuring costs of BayWa's grain trading sites in Southern and Eastern Europe, which had a negative impact on the earnings in the first half of the year. Earnings in the first half of 2016 were also boosted by a more favourable valuation of soya contracts, although this was then revised in the second half of the year. The more low-risk contract positioning in the current year is expected to offset the negative effect incurred in the second half of 2016. Restructuring in Southern and Eastern Europe will also have a positive effect in the second half of 2017. Higher producer prices due to an expected global supply deficit compared to the previous year also point to a high selling propensity among farmers. As a result, Lutz expects BayWa's agricultural trading to pick up significantly in the coming months.
"Overall, things are looking up for all our operating units, meaning that BayWa can continue to anticipate a significant rise in revenues and EBIT for the financial year 2017," explained Klaus Josef Lutz.

Agriculture: BayWa Agricultural Equipment Already Benefiting from Improved Sentiment in the Agricultural Market
The Agriculture Segment at the BayWa Group is divided into four business units: BAST (BayWa Agri Supply & Trade), BAV (BayWa Agricultural Sales), fruit and agricultural equipment.

BAST recorded a slight rise in revenues due to the increase in average grain prices compared to 2016. Specialties trading, such as in malting barley, developed very positively, while the one-off restructuring costs of the sites in Southern and Eastern Europe had a negative impact on EBIT. The difficult market conditions for soya also affected EBIT.
The BAV business unit also saw a slight rise in revenues. EBIT, however, was down slightly year on year, as the collection of grain in BayWa AG's core regions fell due to the below-average harvest volumes and because sales of seed and feedstuff were unable to match the previous year's level.
BayWa expects overall positive development possibilities for the agricultural business of BAST and BAV in the second half of the year; this is due, in part, to the fact that the restructuring implemented will have a positive impact and a rise in producer prices will likely boost farmers' willingness to sell.

Fruit business revenues rose significantly on the back of the initial full-year consolidation of tropical fruit trading company TFC Holland B.V. As the first half of 2016 was boosted by EUR7 million by the special effect of the sale of the T&G Global Limited (T&G) packaging logistics unit, fruit EBIT for the first six months of 2017 is still down year on year. As T&G's export activities are not likely to realise their full potential until the second half of the year on account of the rain-related delays to the New Zealand harvest, BayWa sees good potential for T&G's earnings development through to the end of the year. Business in Germany, which was impacted in the second quarter by a low-yield soft and stone fruit harvest due to poor weather conditions, awaits a difficult 2017/18 marketing season due to major frost damage in the spring, particularly in the Lake Constance region, and correspondingly substantial harvest losses. The domestic harvest situation, however, is likely to increase marketing opportunities for southern hemisphere fruit and also provide additional demand momentum for tropical fruit. BayWa plans to benefit from this development.

Overall, Agricultural Equipment developed even better than expected given the positive economic environment in the agricultural market. Considerable increases were recorded in almost all product areas, resulting in both revenues and EBIT being up significantly year on year in the first half of 2017. The sales of used tractors alone increased by 42%. The business of Dutch company Abemec B.V. and the joint venture with CLAAS in Canada also developed favourably. BayWa expects to see a considerable year-on-year rise in earnings in the current financial year given the good overall situation.

Rise in Conventional and Renewable Energies EBIT
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. Conventional Energies revenues rose in the first half of 2017 due mainly to oil prices, which were higher on average year on year. Although the increase in oil prices resulted in a decline in demand for heating oil, wood pellet sales rose sharply by 24% in the BayWa Group. The filling station business also improved its trade margins, and sales of lubricants profited once again from positive economic development. As a result, EBIT in this business unit also rose slightly year on year.

The Renewable Energies business sector significantly increased both EBIT and revenues in the first half of 2017: BayWa r.e. further expanded its international trading activities with photovoltaic components, thereby increasing the total output of sold PV modules and inverters by 50% each year on year. Wind parks with a total output of almost 66 megawatt (MW) as well as two solar parks in the UK with a total output of approximately 75 MW were also successfully sold. All told, BayWa was able to increase EBIT in this business sector three-fold in the first half of 2017. BayWa considers itself to be well-positioned in this segment to match the very high previous year's level in the financial year 2017.

Building Materials Segment Remains Strong
The Building Materials Segment mainly comprises Group trading activities involving building materials in Germany and Austria. The segment increased both revenues and EBIT in the first half of 2017. This was due to booming construction activity, resulting in rising demand for steel, concrete and pre-fabricated construction elements, for example. Sales of products for civil engineering and road construction projects were also boosted by rising public-sector investments. The positive development in the first half of 2017 was also due to the continuous optimisation of the site network and the successful expansion of the own-brand range. BayWa expects that the Building Materials Segment will continue to grow in the second half of the year, as economic market data indicates a favourable course in the construction business.

Innovation & Digitalisation on Schedule
In the second half of 2016, the activities of the former Digital Farming business unit were transferred to the newly founded Innovation & Digitalisation Segment, which pools all of the BayWa Group's activities in the fields of digital farming and e-business. In the reporting period, the segment joined in partnership with the European Space Agency (ESA) to push forward the assessment of satellite data in the farming industry. The slight year-on-year decline in the segment's revenues was due to the rise in sales of services through other Group companies, however, are not included in the reporting. Due to the year-on-year rise in investments in the development of digital farming solutions and the new BayWa Online World, the segment reported a planned decline in EBIT of EUR1.6 million in the reporting quarter.
 

BayWa Group performance

Agriculture Segment performance

Energy Segment performance

Building Materials Segment performance

Innovation & Digitalisation Segment performance

¹ Includes the figures for the Agriculture, Energy, Building Materials, Innovation & Digitalisation and Other Activities Segments as well as the transition.
² Adjusted for the former Digital Farming business unit
³ Includes the figure for the former Digital Farming business unit