BayWa : Consolidated Financial Statements 2020

Consolidated Financial Statements 2020

of BayWa AG

Consolidated Management Report - Overview

Consolidated Management Report of BayWa AG for the Financial Year 2020

Overview

The BayWa Group developed positively overall in 2020, despite the restrictions in many aspects of life and business as a result of the coronavirus pandemic. In certain business units, the corporate goals for the reporting year were exceeded by a substantial margin. Overall, the Energy Segment developed considerably better than expected. The Renewable Energies business unit, which achieved new highs in both revenues and operating result and was therefore able to benefit from the trend towards sustainable energy generation, was the main factor behind this development. The Conventional Energy business unit also exceeded the goals set for the financial year 2020. The positive development in the heating business was more than able to compensate for the share of earnings accounted for by TESSOL Kraftstoffe, Mineralöle und Tankanlagen GmbH, which was sold at the end of 2019. Likewise, the Building Materials Segment developed better than planned in the reporting year. The positive performance is attributable to the strength of the construction sector, as well as factors such as the segment's positioning as an integrated multi-specialist and the expansion of online channels. At the same time, the Agriculture Segment achieved a year-on-year improvement in earnings on the whole. In the domestic agricultural business, however, the economic situation remains unsatisfactory. Given the great importance of these business activities for the BayWa Group, the measures aimed at increasing profitability will be continued at an accelerated pace. By contrast, the international BayWa Agri Supply & Trade (BAST) and Global Produce business units in the Agriculture Segment developed positively. The Agricultural Equipment business unit, which benefited from extremely brisk demand for tractors, achieved the highest growth rates. In 2020, the BayWa Group once again benefited from its heavily diversified business activities and its strategic orientation towards international markets, as well as from forward-looking business areas and business models. Moreover, the coronavirus pandemic had only a minor impact on the BayWa Group.

On account of the low oil price, the Energy Segment's revenues stood at €4,245.8 million in total in 2020 and were therefore €228.5 million lower year on year. By contrast, earnings before interest and tax (EBIT) increased by 12.0% to €142.7 million, thereby setting a new record. The positive business development was driven by both business units. The Renewable Energies business unit sold wind farms and solar parks with an output of 667.0 megawatts (MW) in total in 2020, with the share of turnkey renewable energy plants increasing to roughly 94%. In 2019, that figure stood at just around 37% of a total completed project output of 911.6 MW.

Overall, revenues rose by 26.6% to €2,500.6 million. Following €101.0 million in the previous year, earnings before interest and tax (EBIT) stood at €110.9 million in the reporting year. The improvement in both revenues and the operating result exceeded the positive expectations and was primarily attributable to project sales and growth in solar trading. Furthermore, the strategic development of the business unit was secured by adding a new partner as part of a capital increase. The Conventional Energy business unit benefited in 2020 from strong demand for heat energy carriers. The Conventional Energy business unit's revenues fell significantly by 30.2% to €1,745.2 million in the reporting year on account of the low oil price, having stood at €2,499.0 million in the previous year. Earnings before interest and tax (EBIT) improved by 20.5% to €31.8 million in 2020 (2019: €26.4 million) primarily due to good margins in the heating oil and fuel business, thereby reaching a new high.

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BayWa AG Consolidated Financial Statements 2020

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Consolidated Management Report - Overview

The Agriculture Segment's revenues increased slightly by 1.2% to €10,988.0 million, with earnings before interest and tax (EBIT) improving significantly by €10.5 million to €107.1 million. In the BAST business unit, the handling volume of grain and oilseed stood at 22.9 million tonnes in the financial year 2020. Adjusted for the reclassification of the speciality trader Evergrain Germany GmbH & Co. KG (Evergrain) from the BAST business unit to the Agri Trade & Service business unit, this figure corresponds to a decrease of 1.2 million tonnes on a like-for-like basis. This decline is attributable to the strategic decision to close the Cefetra Hungary Kft. trading office in Hungary and the discontinuation of the export business in some regions of the Middle East. Due to the lower handling volume and the reclassification of Evergrain, the BAST business unit's revenues fell by 6.2% to €4,573.0 million in the reporting year. Earnings before interest and tax (EBIT) improved by 31.9% to €25.2 million. The improvement in earnings was due to a positive price trend in the second half of the year along with other factors, such as a default on receivables in the previous year in connection with the suspension of bread grain business with Iran. The Global Produce business unit's marketing volume once again saw strong growth of just over 31% to 499,259 tonnes in the financial year 2020. In its domestic business, the business unit was able to market 2019's smaller apple harvest with better fruit quality at rising prices in the reporting year. In the financial year 2020, T&G Global Limited marketed some 40% more apples than in the previous year. All in all, revenues in the Global Produce business unit increased by 11.2% to €938.5 million in the reporting year. Earnings before interest and tax (EBIT) improved by €4.9 million year on year to €41.8 million in 2020. In the Agri Trade & Service business unit, the development of the agricultural input business was generally subdued in 2020. By contrast, grain and oilseed trading volume increased year on year by 5.0% to just under 8.6 million tonnes on a like-for-like basis. Revenues in the Agri Trade & Service business unit increased by 4.4% to €3,606.7 million in the reporting year, primarily due to the higher sales volume in grain trading coupled with a significant year-on-year rise in prices. Earnings before interest and tax (EBIT) indicate a net loss of €14.3 million for 2020 following a positive result of €7.8 million in the previous year. This development was mainly due to high restructuring expenses in connection with the reorganisation of the agricultural trade business in eastern Germany. In addition, the low fertilizer prices led to significant pressure on trade margins. Furthermore, price hedging transactions in grain trading within the scope of the mark-to-market valuation at the end of the reporting period resulted in negative market values that will not be compensated for through basic business activities in the financial year 2021. The Agricultural Equipment business unit was able to significantly outperform the previous year and set new records. The sale of new machinery increased by 27.4% to 5,882 tractors in the reporting year. In the used equipment business, the sales figures increased by 14.4% year on year to 2,215 tractors. Overall, the Agricultural Equipment business unit generated revenues of €1,869.8 million, which equates to a year-on-year increase of 11.1%. In the reporting year, earnings before interest and tax (EBIT) benefited primarily from the strong new machinery business and rose significantly by 65.9% to €54.4 million.

The Building Materials Segment saw a very strong financial year 2020. The dry and mild spring months and the continued high demand for housing led to an increase in sales across the entire product range. In addition, BayWa's building materials sites in Germany remained open throughout the coronavirus-related lockdown phases due to their supply function for the construction industry. As a result, the Group also saw increased demand from customer groups that switched to ordering BayWa products online due to the temporary closures of DIY and garden centres in some German states. The BayWa Group's DIY and garden centres in Austria were forced to close for roughly one month. However, the above-average demand after the reopening of the stores more than made up for the closure-related loss of revenues. The eBusiness activities saw substantial growth, especially during the lockdown phases. At the same time, the ability to deliver products was ensured. Overall, the Building Materials Segment's revenues increased by 11.5% year on year to €1,899.0 million due to volume and price effects, thereby far exceeding the development expectations. The segment's earnings before interest and tax (EBIT) climbed 46.1% to €46.9 million, exceeding the forecast for slight improvement.

The Innovation & Digitalisation Segment's revenues fell slightly to €10.2 million in the reporting year (2019: €10.6 million), as customer contact was restricted due to the coronavirus pandemic. As predicted, the segment recorded negative earnings before interest and tax (EBIT) of €10.9 million (2019: minus €14.6 million).

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BayWa AG Consolidated Financial Statements 2020