After the first quarter: BayWa AG expects significantly more dynamic business in 2024
Revenue and result negative in the first quarter of 2024 as is typical for the season. Board of Management confirms full-year guidance, Strategy 2030 measures take effect. Mild weather conditions supporting development in the agriculture business unit, energy and construction business units affected by poor market conditions
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BayWa headquarters in Munich © BayWa AG, reprints free of charge
After a seasonally typical start to 2024, BayWa AG expects business development to be much more dynamic in the coming months. With revenue totalling €5.2 billion (Q1/2023: €6.3 billion), earnings before interest and taxes (EBIT) amounted to minus €61.3 million in the first quarter (Q1/2023: €91.8 million).
“It’s clear to see after the first three months of the year that we are on the right track,” said BayWa CEO Marcus Pöllinger. “Many of our Strategy 2030 measures are being successfully rolled-out in our Group’s business sectors and Group companies. Inventories and capital tied-up have already been reduced noticeably, for example in the Agri Trade & Service Segment: Compared to previous years, we have reduced product levels by 45%, but have retained our capacity to deliver, as we have streamlined our handling processes and are supplying the agricultural sector ‘just in time’. And this is why I am very confident about the rest of the financial year.”
The BayWa Board of Management confirms its guidance for 2024. The target corridor for BayWa AG’s EBIT is between €365 million and €385 million.
Renewable Energies: BayWa planning large-scale project sales in the second half of the year
BayWa AG’s performance in the first quarter of 2024 was driven by developments in the Renewable Energies Segment: While prices for solar modules continued to fall and weighed on trading margins, project rights with a total output of around 230 megawatts (MW) were primarily sold in the solar park and wind farm project business. BayWa expects further transactions on a substantially larger scale in the second half of the year. These will make a significant contribution to the development of earnings.
The agriculture business unit was shaped by various developments in the first three months of 2024. The Agricultural Equipment Segment was bolstered by the early start to the season and unwavering investment appetite in agriculture, enabling it to exceed the record result of the same quarter in the previous year. The Agri Trade & Service and Cefetra Group Segments also developed positively. In the Global Produce Segment, the ongoing apple harvest in New Zealand is pointing to high quality and a successful sales season.
The negative development in the Construction Segment reflects weak demand for construction services in Germany.
Individual segment performance
Renewable Energies Segment
The Renewable Energies Segment recorded revenue of €904.2 million in the first quarter of 2024 (Q1/2023: €1.5 billion) and EBIT of minus €65.2 million (Q1/2023: €53.0 million). This significant decline is due to ongoing weak demand and the extreme drop in prices for solar modules. In the project business, BayWa primarily sold project rights with a total output of 230 MW by the end of March. Further project sales (totalling 950 MW) and the sale of project rights (1.2 GW) are planned by the end of the year.
Energy Segment
With revenue of €577.2 million (Q1/2023: €633.2 million), EBIT in the Energy Segment amounted to minus €1.6 million and was therefore down on the previous year, as expected (Q1/2023: €4.5 million). Mild winter conditions resulted in lower demand for heating products. Many consumers had already stocked up on heating oil at the end of 2023 due to the CO2 price increase in January. In the wood pellets trade, prices were down 30% against previous year levels, impacting margins negatively. BayWa is expecting sales volumes to rise in the coming months given the current price levels and stocks in boiler rooms running low.
Cefetra Group Segment
The Cefetra Group Segment got off to a good start to the year with revenue of €1.3 billion (Q1/2023: €1.4 billion) and EBIT of €14.9 million (Q1/2023: €17.1 million). Upheaval on the international agricultural exchanges has largely subsided. Trade in grain and oilseed meal was almost on a par with the previous year. Food ingredients business, which includes products such as nuts and legumes, saw weaker development in the first quarter of 2024. In addition to declining demand, higher packaging costs had a negative impact on the business. BayWa expects the segment’s above-average performance to continue over the remainder of the year.
Agri Trade & Service Segment
The Agri Trade & Service Segment concluded the first quarter of 2024 with revenue of €1.2 billion (Q1/2023: €1.5 billion) and EBIT of €18.1 million (Q1/2023: €31.0 million). There was a significant increase in demand for operating resources as a result of the early start to the agricultural season caused by the weather. BayWa expects this positive trend to continue over the course of the year, especially with regard to more efficient handling and sales processes for fertilizers and seeds, which will be rolled-out in other product areas. Sales of agricultural products in the first quarter were slightly up on the previous year.
Agricultural Equipment Segment
The Agricultural Equipment Segment is continuing seamlessly from the record year 2023. Revenue rose to €592.3 million in the first quarter of 2024 (Q1/2023: €539.9 million) and EBIT to €24.0 million (Q1/2023: €22.4 million). Farmers continue to invest heavily in machinery and technical equipment. The leading trade fair Agritechnica, which took place again in November 2023 for the first time since the coronavirus pandemic, provided positive impetus and created a high order backlog for BayWa. In addition, BayWa workshops are very well booked given the early start to the season. The company expects this dynamic development to continue in the coming months.
Global Produce Segment
In the Global Produce Segment, revenue after the first three months of the current financial year totalled €269.2 million (Q1/2023: €257.1 million), while EBIT amounted to minus €9.9 million (Q1/2023: minus €12.6 million). In the German pome fruit business, the sale of the 2023 apple harvest will continue until early summer. Prices are high, as fewer apples were harvested than in the previous year. This also benefits the export business of BayWa subsidiary T&G in New Zealand, for which Europe is an important sales market. The sales of tropical fruits, such as mangoes and avocados, fell short of expectations in the first quarter of 2024 due to the weather conditions.
Construction Segment
The Construction Segment began 2024 in line with expectations with revenue of €363.7 million (Q1/2023: €414.4 million) and EBIT of minus €21.5 million (Q1/2023: minus €9.1 million). High construction prices and continually high mortgage rates have brought residential construction to a virtual standstill. BayWa expects positive impetus from civil engineering and public sector construction as well as from the business of BayWa Bau Projekt GmbH, which sold additional residential units by the end of March. In addition, the cost-cutting measures already initiated will have a positive impact on earnings in the Building Materials Segment over the course of the year.
