BayWa : Consolidated Financial Statements 2023

Consolidated Financial Statements 2023

of BayWa AG

Imprint

Project management and coordination BayWa AG, Munich, Germany Corporate Accounting

Text

BayWa AG, Munich, Germany

Corporate Accounting/Investor Relations

Translation lennon.de Language Services, Münster, Germany

Copyright credits Graphics: KMS TEAM GmbH

Pictures pages II and IV/V: Enno Kapitza

For more information please contact BayWa AG

Investor Relations Arabellastr. 4

81925 Munich, Germany Phone +49 89 9222-0 Fax +49 89 9212-3887

E-mailinvestorrelations@baywa.de

BayWa website:www.baywa.com© BayWa AG, Munich, Germany

Language versions

The consolidated financial statements are available in German and English. Only the German version is legally binding.

Both versions can be viewed and downloaded at:www.baywa.com

Contents

Consolidated Financial Statements

I

Letter to Our Shareholders

Dear Shareholders,

Dear Readers,

I have been the Chief Executive Officer of BayWa since spring 2023 and, in this capacity, I have the honour of informing you for the first time about the BayWa Group's performance in the past financial year and our plans for the future.

For our company, 2023 was once again characterised by many challenges in various areas: The ongoing war against Ukraine, a sharp rise in interest rates and high inflation rates, which resulted in a sluggish recovery in Europe and China. Another factor in Europe and Germany is massive overregulation of com-panies. In our domestic market of Germany, this mixed situation combined with high energy prices caused the country to slip into recession. This trend is

Marcus Pöllinger

also reflected in our figures.

Chief Executive Officer of BayWa AGAfter our record-breaking 2022, which saw substantial excessive market development due to a shortage of products and extreme price surges as a result of the war against Ukraine, the pendulum swung in the opposite direction last year. Agricultural and energy prices have declined signifi-cantly from their elevated levels, which is why we had already forecast a weaker result. However, the general economic headwind and our strong growth in previous years - driven by debt-financed acquisitions - proved to be an additional burden in the financial year 2023.

While the Agricultural Equipment, Cefetra Group and Renewable Energies Segments once again proved to be earnings drivers, we expe-rienced clear declines in the Global Produce, Building Materials and Agri Trade & Service Segments. The Global Produce Segment had to contend with the consequences of a cyclone that destroyed large parts of the plantations and harvest of our New Zealand subsidiary. The dramatic slump in German residential construction led to an immense drop in demand in the Building Materials Segment. In the Agri Trade & Service Segment, trading suffered from significant price declines in agricultural commodities and especially in the fertilizer business.

Overall, the operating performance is pleasing, taking into account the in some cases unprecedented market factors. However, the Group's earnings performance is not to our satisfaction. We may have only just fallen short of our forecast for earnings before interest and taxes (EBIT) - a key performance indicator - but the net result for the year failed to meet expectations by some distance. EBIT totalled €304.0 million, down from €504.1 million in the previous year. However, the net result for the year, which shows what the Group actually generated after interest and taxes, fell from €239.5 million in the record year of 2022 to minus €93.4 million in 2023. There are several reasons for this. In recent years, we have made some significant investments and geared BayWa toward markets that promise high demand and further growth in the future. However, these high investments are offset by corresponding debt financing, which has become much more expensive as interest rates rise. This was compounded by an unexpectedly high tax rate, which had a corresponding-ly strong negative impact on earnings after tax. For us, this means that we will focus even more strongly on our financing structure and increasing the net result for the year in future.

Last year, we took the first steps in putting BayWa on firmer footing for this changing environment. Optimising our investment portfolio is a major factor here. We are scrutinising the contributions that individual companies make in our segments, and reviewing whether they are part of our core business and how profitable they are. The targeted sale of companies is therefore a logical step. One objective last year was the sale of our Solar Trade subsidiary, but the environment proved to be unfavourable for such a transaction, despite numerous interested parties expressing their interest. We are therefore confident that we will be able to restart the sales process by the end of the calendar year 2024 provided the market recovers. Until then, we will continue to run the Solar Trade business as part of the BayWa Group. By contrast, the sale of the NEXT Farming software business and the sale of the Group company FarmFacts GmbH was successful. These transactions and others will help us to reduce our high financing costs by a noticeable margin once again.

II

We will also be integrating the companies that make up our core portfolio more closely moving forward with the aim of creating a port-folio that is yield-orientated rather than broad, and reducing interest expenses markedly. In the past financial year, we were largely able to compensate for individual loss-making businesses thanks to our diversified portfolio. However, this should not become the norm. Our mission must be for each segment to be successful and profitable in its own right.

Further measures relate to the Group-wide optimisation of warehousing and working capital. Supply chains are running smoothly again, allowing us to reduce our inventories and lower associated costs. In addition, we have initiated cost-cutting and optimisation measures across the Group in order to improve BayWa's profitability at all levels over the long term.

These measures also include the suspension of the dividend, which the Management Board and Supervisory Board will propose to the Annual General Meeting. This is not a decision we made lightly. But it is a necessary step if we want to work effectively on reducing our debt. We only want to pay out to our shareholders what we have actually generated as profit.

The topic of sustainability continued to occupy us in the past financial year, not only because, with our 100-year history, we are a byword for sustainability ourselves, but especially because our three business units - energy, agriculture and building materials - are inherently linked to the topic and contribute to it. We want to expand our activities in this area and play an increasing role through our actions, but also for our customers. Being honoured with the German Sustainability Award confirms that we are on the right track.

With this mixed year, impressive sales and unsatisfactory earnings performance, we are optimistic about the financial year ahead. Our operational stability, despite all the challenges in the reporting year, confirms that our fundamental strategy is the right one. Our sales markets are attractive and offer plenty of potential. With our diversified business model, we are a part of the megatrends of food and energy security. We know where the opportunities for greater profitability are, and now we just need to act on them. While the reduction in inventories is expected to be implemented soon, the optimisation of the portfolio will take time.

We expect the environment to remain challenging in 2024. The economy in key markets has hardly gained any momentum so far. Interest rates might only fall by a small margin, and probably not until the summer, and the conflicts in the Middle East and global crises are continuing. We have implemented the first wave of measures to optimise portfolio management across all segments and reduce our capital commitment and the interest burden in the financial year 2024. Accordingly, BayWa anticipates positive, albeit varied, develop-ment in most segments and overall for the current financial period. For the current financial year 2024, we anticipate a significant increase in EBIT compared to the previous year.

Together with my colleagues on the Executive Board, Dr. Marlen Wienert, Andreas Helber and Reinhard Wolf, we would like to thank all our employees and our customers and business partners worldwide for their successful cooperation and commitment. BayWa's employees are a key factor in the success of our company and their dedication makes a decisive contribution to our positive perception on the market.

I would also like to thank you, our valued shareholders, for your trust, even in these challenging times.

Best regards,

Marcus Pöllinger

Chief Executive Officer of BayWa AG

III

Andreas Helber Chief Financial Officer

Marcus Pöllinger

Chief Executive Officer from 1 April 2023

Responsible for the Renewable Energies, Cefetra Group, Global Produce and Building Materials Segments

IV

Dr. Marlen Wienert

Member of the Board of Management from 1 April 2023

Responsible for the Energy, Agri Trade & Service and Agricultural Equipment Segments

Reinhard Wolf

Member of the Board of Management Responsible for RWA Raiffeisen Ware Austria Aktiengesellschaft, Korneuburg, Austria

V

"After the record year 2022, the financial year 2023 showed us where we need to optimise our profitability. Now it's a matter of making these adjustments."

Marcus Pöllinger

Chief Executive Officer of BayWa AG

Consolidated Management Report - Overview

Consolidated Management Report of BayWa AG for the Financial Year 2023

Note about this consolidated management report

• ▪ Qualitative and comparative statements are used to describe changes in results and earnings, as well as forecast ranges. Explanation of the qualitative and comparative statements:

  • ▪ slight, moderate, low ≙ 1-5%;

  • ▪ noticeable, clear ≙ 5-10%;

  • ▪ substantial, considerable ≙ 10-20%;

  • ▪ significant ≙ 20-50%;

  • ▪ sharp, steep, strong ≙ > 50%

• ▪ For reasons of readability, gender-specific wording and formal reference to all gender identities are not used. The selected form stands for all genders (m/f/other).

• ▪ As in the previous year, this consolidated management report includes disclosures that do not constitute mandatory content of the management report in accordance with the relevant legal provisions or the requirements of German Accounting Standard 20 (GAS 20). These disclosures, known as "atypical" disclosures, are not required to be included in the audit. They are therefore clearly highlighted and labelled as such in this report to distinguish them from audited management report disclosures. Examples of such atypical management report disclosures include descriptions of the key characteristics of the internal control system (ICS) and of the risk management system, which were included in the consolidated management report in accordance with Recommendation A.5 in conjunction with Principle 5 of the German Corporate Governance Code (GCGC) 2022 and can be found on pages 65 and 66.

Overview

As expected, the BayWa Group recorded a decline in the financial year 2023 compared to the exceptional year 2022. The price shocks and supply bottlenecks on the commodity and energy markets triggered by the war against Ukraine have largely dissipated. Some of the previous year's extraordinary price rises have reversed and led to extreme price falls, particularly for agricultural commodities. Lower prices and sales volumes than in the previous year also resulted in lower margin potential for BayWa in some cases. Cyclone Gabrielle in New Zealand in the Global Produce Segment, as well as the massive weakness of the construction industry in Germany also had a negative impact. The Agricultural Equipment and Cefetra Group Segments, on the other hand, performed positively, with further growth compared to the record year. Compared to the years before the start of the war against Ukraine, the Group was able to increase revenues and EBIT, although high interest and tax expenses led to a net loss for the year. The profitability of all segments is to be sustainably improved through cost-cutting and optimisation measures.

The energy business unit (Renewable Energies and Energy Segments) recorded weaker revenues and earnings performance, mainly due to the sharp year-on-year fall in prices on the energy and raw materials markets. Revenues in the reporting year totalled €8,609.4 million, down 12.4% on the previous year's figure of €9,832.8 million. EBIT fell by 27.7% to €211.6 million (2022: €292.7 million).

BayWa AG Consolidated Financial Statements 2023

1

Consolidated Management Report - Overview

While the Renewable Energies Segment continued to expand year on year in energy trading, revenue and earnings performance was negatively impacted by weak demand and the fall in module prices in solar trading. The segment's revenues in the financial year 2023 amounted to €5,789.4 million, which corresponds to a decrease of 10.8% compared to the previous year's figure of €6,489.2 million. At €193.8 million, EBIT in the reporting year was 18.9% below the previous year's high figure of €239.1 million.

Business development in the Energy Segment was primarily characterised by the weaker trading momentum for fossil fuels and lubricants compared to 2022 and lower trading margins as a result of the downward price trend on the energy commodity markets. As a result, a substantial decline in revenues of 15.7% to €2,820.0 million was recorded in the reporting year (2022: €3,343.6 million). On the earnings side, EBIT fell by almost 67% to €17.8 million compared to the record level of the previous year (2022: €53.6 million).

In the agriculture business unit (Cefetra Group, Agri Trade & Service, Agricultural Equipment and Global

Produce Segments), revenues fell by 10.3% year on year to €13,326.5 million. At €160.5 million, EBIT was 37.2% below the previous year's figure of €255.5 million. The development of the individual segments was varied.

The Cefetra Group's trading environment continued to be affected by turbulence and volatility on the commodities markets in the reporting year 2023. Nevertheless, the Cefetra Group was able to participate in the trading opportunities that arose in the financial year 2023 in both its conventional and speciality business and, following the record result in 2022 - characterised by numerous highs in agricultural products - was able to report very pleasing performance. In the higher-margin speciality business, the new subsidiaries Cefetra Dairy and Sedaco contributed to the positive development. Revenues in the Cefetra Group Segment fell from €6,111.2 million to €5,309.3 million in the reporting year, a decrease of 13.1%. This is mainly due to falling prices for many products following the market exuberance in the previous year. In the previous year's result, the cancellation of grain contracts due to the war against Ukraine was compensated for by more expensive hedging on the spot market. There were no such burdens in the reporting year, which is why the Cefetra

Group's EBIT of €64.6 million is 8.6% higher in 2023 than the very successful record year of 2022, when it came to €59.5 million.

Business in the Agri Trade & Service Segment has largely normalised following the exceptional year of 2022 and the effects of the war against Ukraine. However, better availability of agricultural commodities led to greater competitive pressure. In addition, extreme weather conditions between drought and heavy rainfall at harvest time had a negative impact on the quantity and quality of produce and the demand for agricultural inputs, such as crop protection and fertilizer. Against this backdrop, BayWa recorded a substantial volume- and price-related decline in revenues of 14.8% to €4,899.3 million in the financial year 2023. Following the extreme market turbulence in 2022, EBIT fell sharply by 74.8% from €104.7 million to €26.4 million in the reporting year 2023. In addition to rising personnel costs due to collective wage agreements, it was primarily the fall in fertilizer prices that led to a significant decline in trading margins and triggered a write-down of fertilizer inventories. Nevertheless, EBIT in 2023 is almost twice the level it was in 2021.

The Agricultural Equipment Segment continued to develop favourably. Sales of new machines rose by over 5% in 2023. In addition to a high willingness on the part of farmers to invest in their fleets, the sales of new machinery benefited above all from the resolution of supply chain problems and the resulting improvement in manufacturers' ability to deliver compared to the previous year. The maintenance and service business as well as trading in spare parts and specialised trade products in all sales channels also developed correspondingly positively. Overall, the Agricultural Equipment Segment was able to increase the previous year's record revenues by 7.8% to €2,239.3 million. EBIT amounted to €84.6 million in the reporting year, an increase of over 20% compared to the figure generated in the previous year of €70.2 million.

The Global Produce Segment was confronted with persistently difficult conditions in the financial year 2023. The consequences of Cyclone Gabrielle in New Zealand, an important production and procurement market for BayWa, also had a negative impact on business, as did the lower availability of goods due to weak harvests in Europe and other important supply regions. The higher prices could not compensate for the costs of the storm damage and the lower sales volume. In the reporting year, insurance companies only paid out part of the total claims from the cyclone damage, which were made up of financial losses and business interruption losses.

2

BayWa AG Consolidated Financial Report 2023

Attachments

• Original Link
• Original Document
• Permalink

Disclaimer

BayWa AG published this content on 27 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2024 06:33:07 UTC.