Strategy delivers record EBIT in FY21
BayWa is an international trading company operating in the fields of energy, agriculture and building materials. In this thematic report, which is the sixth in a sequence of short notes and interviews about BayWa, we explore how the company’s heavily diversified business activities in relatively defensive markets and its international reach limited the impact of the coronavirus pandemic on performance during FY21 and enabled BayWa to report record levels of EBIT.
EBIT growth in five of seven main segments
BayWa Group’s revenues rose by 21% to €19,839.1m during FY21. Roughly half of the increase was attributable to activities in the Renewable Energies segment, the remainder primarily to commodity price inflation. EBIT jumped by 26% to €266.6m, the highest level in the company’s history. The uplift was driven by improvements in the Renewable Energies segment relating to high demand for PV components, in the Cefetra Group segment because of volatility in commodity prices, in the Agri Trade & Service segment following a restructuring programme and in the Building Materials segment, which benefited from a construction boom in Germany.
Management expects up to 20% EBIT growth in FY22
Demand for PV components continues to be strong and in addition the Renewable Energies segment is likely to benefit from sales of solar and wind projects already in its pipeline. The Cefetra Group segment is likely to benefit from continued volatility in agricultural commodity prices and the Agri Trade & Service segment should show a full year’s benefit from the restructuring programme. On the other hand, high energy prices are likely to affect demand for heating oil and, indirectly, demand for fertiliser, and cause cost-pressures in the Global Produce and Building Materials segments. In addition, supply constraints caused by the coronavirus pandemic are likely to adversely affect the Agricultural Equipment segment. Overall, assuming that the coronavirus pandemic does not lead to any new negative economic effects, management expects group EBIT to be up to 20% higher than the record achieved in 2021.
Targeting €400–450m EBIT by 2025
Management’s long-term goal is for group EBIT of €400–450m by 2025. The primary growth driver is likely to be the Renewables Energies segment, which is benefiting from demand for wind and solar energy, political support for which is intensifying as the West seeks to reduce its dependence on Russian oil and gas. Segmental growth should be accelerated by the €530m direct equity investment in the segment, which was received during FY21.
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BayWa is a client of Edison Invesment Research limited
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