is expected to record for the first time the company’s trading giant for agricultural products in BayWa. Due to the turmoil in the raw material markets and high interest charges, the presentation of the balance sheet on Thursday (28.3.2024), Germany’s largest retailer of agricultural and building materials, BayWa is predicted to show for the first time damage to the group’s history. BayWa CEO Marcus Paulinger therefore defends the cancellation of the dividend: “I don’t pay dividends from the substance,” he points out. His predecessor, Klaus Josef Lutz, recently resigned as chairman of the supervisory board, after the supervisory body expressed its undivided trust in Paulinger. This is a alleged breach of compliance with the listed company. According to company circles, there were allegations that a former director had prepared evaluations of board members and had forwarded them to external bodies without authorisation. Internally, it was rumored that Lutz wanted to take the opportunity to get rid of his successor, because he had broken old ties within the group. Beyond the battle of power that rages internally, things don’t look better functionally. In 2023 there was probably a first-time damage to the company’s history and the dividend was cancelled, according to Handelsblatt. In his first major interview, Paulinger answers the question “what happened to Baywa” saying that ” Baywa is a modern, innovative company. But we have faced some opposite winds. Our clients, farmers, face new challenges. The construction industry has collapsed at a speed we didn’t expect. We had a cyclone in New Zealand that pushed the result of our apple business there into red. And we saw a fall in the price of solar units, which led to understatements. There is even less need for internal power dispute. The Supervisory Board has expressed its undivided trust in me. This is the end of the matter for me. I hope that peace will come back now.” Supervisory Board Chairman Lutz – his predecessor – left achieving a record result. However, profits collapsed in Paulinger’s first year. “In 2022, we were able to benefit from the market environment thanks to the rise in commodity prices. Last year was harder. We move along with the market,” Paulinger explains. The marketing of agricultural products is one of the three business sectors of BayWa, along with renewable energy sources and the marketing of construction materials. At the beginning of the war cereals prices rose sharply, resulting in rising food prices. “Because of the very, very strong Russian harvest, prices are likely to stabilise at the current level for now”. In the long run, however, he thinks they will remain at similar levels if they do not see geopolitical unrest. “World markets have now assessed the situation. At first, we kept seeing spikes in grain prices every time there was news of war. Today, supply channels have largely calmed down,” the CEO stressed. As for the role of cereals from Ukraine, he says that when the war began, they had two ships in Odessa. Ukraine exported everything through the Black Sea. Today, other routes are used. Ukraine now exports nearly 8 million tonnes of cereals and oil seeds a month. He goes on to say that “the biomass data surveys from satellite images taken from our Vista subsidiary show that the seed has returned to pre-war levels, especially in western and southern Ukraine. We expect a largely normal harvest here in 2024”. With cereal prices falling again, German farmers’ incomes are likely to decline again. “The farmers are the managers of nature’s critical infrastructure. They are responsible for issues such as healthy nutrition, climate protection, biodiversity and much more. These duties must be paid differently. I share anyone who protestes peacefully,” Paulinger argues. Most companies have taken advantage of low interest rates and cheap money over the last 15 years to expand, including BayWa. “Capital costs increase in the current interest rate environment. Therefore, we are looking closely at the areas in which we do not have the necessary profitability. We will focus our portfolio,” Paulinger notes. In addition, BayWa’s main development sectors are international trade in cereals and special products and renewable energy sources. Last year, nearly 300 megawatt solar and wind parks were connected to the network and sold. The German agricultural and construction sector is to be optimized and Paulinger says they will continue to improve infrastructure there. New investments will be channelled mainly to renewable energy sources and to the international trade in cereals. In the construction sector, the expected recovery is not visible in 2024. They therefore examine all measures, including short-term work. However, BayWa’s CEO is convinced that the construction sector is a future sector that the group will develop and remain one of the development pillars. The company has 5 billion euros due to the expansion with cheap money. The cost of interest is now borne by the result. The debt must be reduced and the equity ratio back to 20% increased. Baywa is not a case of restructuring, but of optimization. “He will be in the winning zone in 2024,” Paulinger states.
Germany: Damages Will First Record Corporate Coliseum of Marketing of Agricultural Products
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