BayWa, the Munich-based multinational conglomerate of agribusiness, energy and building supplies businesses, has increased profitability on similar revenues from trading in full year 2020, despite the pandemic disruption.
The Group’s agribusiness segment benefitted from strong commodity trading in 2020, but notes that farm input volumes are falling as more growers adopt precision application technologies.
BayWa’s Agriculture segment – which includes international commodities trading house Cefetra – reported an EBIT of €107.1 on revenues of €11.0bn, up from the previous year’s €96.6m and €10.9bn.
The division had a strong second half, as the international grain and oilseed trading benefited from price increases in line with anticipated harvest losses in key growing regions of the world, together with strong demand for feed materials from China to support its recovering pig herd after African swine fever stocks recover.
The company said that the effect of coronavirus control measures on its supply chains was manageable.
However, increased logistics costs, as well as competition and price pressure in soybean and meal trading, had an adverse effect. BayWa’s trading of specialities and sustainable agricultural commodities was stable in the period, and it intends to expand these activities in 2021.
Seeds better than expected
Farm trading in the Group’s domestic market of Germany was helped by a reasonable grains harvest and strengthening prices since August 2020. But the supply of agricultural inputs to German farmers was more challenging in 2020 – poor weather reduced application windows and fertiliser margins were under pressure, while stricter legal requirements and greater adoption of precision application technologies – especially for fertilisers and crop protection products – negatively affected farm input sales Seeds were the exception, with sales better than expected.
The German agricultural trade returned a negative EBIT, despite higher revenues, following a one-off restructuring of operations in eastern and northern Germany last year.
BayWa predicts a further slight fall in its fertiliser and crop protection business over 2021. “The trend towards more organic farming and society’s ecological expectations towards farmers are having a noticeable effect here,” it comments.
Sales from the Agricultural Equipment business unit in Germany exceeded expectations, with record sales of new and used machinery. The group noted a trend towards machines that are more efficient and resource conserving in applying agricultural inputs.
The BayWa group has posted €215.2 million earnings before interest and tax on revenues of €17.2 billion in the year ended 31st 12 2020, compared to 2019’s €188.4m and €17.1 billion. There was a strong contribution from its renewable energies business unit, despite lower revenues.
The Group predicts that revenues and EBIT will increase slightly in financial year 2021, provided the restrictions imposed on the global economy due to the ongoing coronavirus pandemic remain manageable.
“As a provider of essential goods and services, BayWa is a diversified, international company with a successful track record in forward-looking business units such as Renewable Energies,” said chief executive Klaus Josef Lutz.
“The global expansion of renewable energies is a megatrend that continues unabated. Our conventional business areas also developed positively. From heating oil and wood pellets to fruit and tractors and the building materials trade, almost all operating areas benefited from high levels of demand and recorded year-on-year growth, in some cases by a substantial margin.”