Interim Report of the BayWa Group for the Period from 1 January to 30 September 2015

Transcription

1 I N T E R I M R E P O R T of the BayWa Group 1 January until 30 September 2015

2 Interim Report of the BayWa Group for the Period from 1 January to 30 September 2015 The Report provides information on the business performance of the BayWa Group in the third quarter and in the first nine months of the financial year BayWa Group: Major earnings improvement in the third quarter driven by international activities in million Q3/15 Q3/14 % 9M/15 9M/14 % Revenues 3, , , , EBIT > Consolidated EBIT (earnings before interest and tax) almost tripled year on year in the third quarter, rising from 12.4 million to 34.6 million. Project development business in the Renewable Energies business sector was a major contributor to this performance. Performance in international grain and fruit trading activities was positive; however, this was unable to fully compensate for the problems suffered in domestic produce trading during the harvest phase. In the first nine months of the year, consolidated revenues stood at 11.1 billion, a year-on-year decline of 3%. EBIT rose by 0.8 million to approximately 75.3 million thanks to a strong third quarter (2014: 74.5 million). The decline in revenues was largely the result of falling commodity prices for crude oil and agricultural produce. In the Agriculture Segment, domestic farmers showed a low willingness to sell produce on account of the price trend, as was the case in the previous year. What is more, corn yields dipped by some 30% due to the unusually warm summer. Strong trading performance by Dutch subsidiary Cefetra was unable to balance out these negative trends. All in all, grain harvests remained in some regions at the same high level as the previous year despite the poor corn harvest, which promises BayWa 1

3 potential moving forward. As expected, agricultural equipment was unable to match its strong performance from the previous year. That being said, business remained at a high level and outperformed the overall market by a considerable margin; the agricultural equipment market has seen a 10% decline in new registrations so far this year. Fruit business was bolstered by a southern hemisphere harvest that exceeded expectations from the start of the year. Another positive factor was the steady recovery of prices following last year s price war triggered by Russia s ban on imported goods. As expected, the Energy Segment recorded the largest increase in earnings of the three core segments. The 35% rise in earnings year on year was largely due to the sale of the 80 megawatt (MW) Beethoven wind park in the US. In addition, the first of four completed solar parks in the UK was also sold. Alongside sales in renewable energies project development business, the segment also benefited from performance in conventional energy business. Demand for heating oil rose on account of the lower oil price, and fuel business remained stable, contributing to the improvement in earnings. Business performance in the Building Materials Segment improved in the third quarter, but it still fell short of expectations. It still has 3.5 million to make up to match the previous year s EBIT figure. This is due to ailing demand, particularly for the energy-efficient renovation of detached and semi-detached homes, which is unpopular among consumers due to the withdrawal of subsidies by the government and the low oil prices. The framework conditions in the agricultural sector are likely to turn in favour of BayWa in the final quarter. The increasing marketing of harvests from core regions and the reduction in start-up costs for new European trading operations are likely to play a major role in this final-quarter rally. In addition, Agritechnica, the world s largest agricultural equipment trade fair, could also generate additional buying impetus for agricultural equipment business. In terms of fruit trading, the conditions for the start of European harvest marketing in the northern hemisphere are an improvement on the previous year. In the Energy Segment, the Group is also confident that several completed plants in the Renewable Energies business sector and the traditionally strong winter quarter for energy carriers in heating systems will 2

4 give an added boost to earnings. Despite the solid order situation, the Building Materials Segment is still likely to face the greatest challenges. Problems such as personnel-related capacity constraints in completing projects before the onset of winter, or an early start to winter, could jeopardise the chances of matching 2014 earnings. Segments of the BayWa Group Agriculture Segment in million Q3/15 Q3/14 % 9M/15 9M/14 % Revenues 2, , , , EBIT > Industry trends The majority of grain and oilseed harvests in the northern hemisphere have been completed, allowing more-accurate volume forecasts for 2015/16. In spite of problematic weather conditions in some regions around the world and previous forecasts to the contrary, the global grain harvest is only likely to fall marginally short of last year s record-breaking figures. Currently, the United States Department of Agriculture (USDA) is forecasting global grain production (excluding rice) of 2.0 billion tonnes this year. Two major factors in this trend are the further rise in wheat volume to 733 million tonnes (2014: 725 million tonnes) and the decline in corn harvest volume to 973 million tonnes (2014: 991 million tonnes). For Europe (28 European Union member states), experts anticipate a decline in grain production this year to approximately 302 million tonnes (2014: 329 million tonnes). This reduction is primarily due to the roughly 22% drop in corn harvest volume to around 58 million tonnes. In Germany, grain inventories in some regions suffered significantly from sustained periods of hot, dry weather in the summer months, meaning that grain corn volumes could be one-third down on previous-year figures. In terms of wheat, the decline in harvest volumes compared to 2014 is less severe at 10%. Total grain production in Germany is forecast to fall by at least 11% on the record-breaking 3

5 figures from the previous year to an average level of roughly 46.5 million tonnes. All in all, declines in production in North America and Europe were not as great as first feared in June, which is likely to lead to a continuation of the solid global grain supply situation, in spite of the constant increase in consumption. The expected ample supply of soy worldwide will also contribute to a further rise in inventory stocks in the grain year 2015/16. This trend is also reflected in the development of grain prices: Following the sharp increase in the price of milling wheat on the Matif futures exchange to the previous annual high of roughly 205 per tonne at the start of July, prices fell back to 150 per tonne by early September. Since then, prices have recovered slightly to around 180 per tonne. Against this backdrop, trading activities are experiencing slight recovery at the moment in the wake of a summer characterised by both apprehension in buying activities among processors and a low willingness to sell among farmers. In the case of fertilisers, attractive warehousing conditions for the new season boosted demand at the start of the fertiliser year 2015/16. Prices at the start of the season were roughly at the same level year on year and encouraged the early purchase of calcium ammonium nitrate and urea. However, demand for crop protection products has declined so far this year on account of lower use due to the dry weather conditions. In addition, falling producer prices particularly for milk, pork and, above all, grain dampened sentiment and led to a further dip in German farmers investment propensity. Planned investment volume for farm buildings, for instance, fell by around one-half year on year. At 23,571, the number of newly registered tractors as at the end of September 2015 was also down by roughly 10% on the previous year s figure. The world s largest agricultural equipment trade fair, Agritechnica, which is due to be held in November, is likely to give agricultural equipment business a boost, particularly in the area of smart farming. In terms of the fruit sector, this year s European pome fruit harvest is in full swing. According to the latest forecasts, apple harvest volumes in the 28 EU member states are expected to fall by around 5% from last year s record-breaking figures to just under 12 million tonnes. In Germany, however, apple harvests are likely to decline by some 21% to approximately 885,000 tonnes. The reasons for this sharp decline in harvest volume include apple sunburn due to the hot summer weather and reduced fruit growth due to the dry conditions. Given the shortage of supply, higher apple 4

6 prices could be achieved in the 2015/16 sales campaign. The current marketing season for the excellent apple harvest in New Zealand is slowly coming to an end and is likely to lead to a new record in exported volumes, with demand exceeding supply in many areas, especially Asia. Business development Consolidated revenues in the Agriculture Segment, which comprises trading in agricultural operating resources and produce as well as the Agricultural Equipment and Fruit business units, came to approximately 7.7 billion as at 30 September This equates to a year-on-year decline of 0.2%. Revenues almost matched the previous year s figure, but operating segment earnings (EBIT) declined to approximately 63.9 million as at the end of the first nine months of the financial year (2014: 69.8 million). In produce and operating resources trading, business performance in the 2015 harvest quarter was marked by a severe slump in grain prices between early July and late August after global harvest forecasts for 2015/16 were hiked to an unexpectedly steep extent. Falling producer prices and uncertainty with regard to further price development led initially to sluggish harvest sales in BayWa AG s collection and storage regions. This issue was exacerbated by a gradual decline in corn harvest volumes in these regions, which reduced willingness to sell even further. Prices bottomed out in early September, after which farmers willingness to sell agricultural produce increased. The robust supply of grain meant that demand was below average among industries and processors alike. Demand only really picked up again in October, with international demand for EU grain rising in particular thanks to the stronger competitive position caused by the weak euro. International grain trading subsidiaries benefited particularly from this trend in terms of their import and export activities, helping the BayWa Group to generate year-on-year growth in produce trading volume. Operating resources business has performed inconsistently recently following the moderate development in the first half of the year. Seed sales remained stable in the reporting quarter, but the fall in fertiliser prices led to greater interest for early purchases among re-sellers and farmers. Demand for crop protection products remained low due to the dry weather conditions. All in all, revenues in the Agricultural Trade business unit experienced a price-related decline of 0.8% year on year to 5

7 around 6.2 billion in the first nine months of the current calendar year. In terms of the operating result, the lack of drying revenues due to prevailing weather conditions and the loss of income from a decline in corn collection and storage business prevented any year-on-year improvement. In addition, start-up costs for the newly acquired grain and oilseed trading companies in Southern and Eastern Europe also impacted the earnings trend. In total, the business unit recorded EBIT of 32.8 million as at 30 September 2015 (2014: 40.3 million). The recent recovery in grain prices should give subsequent collection and storage business extra impetus in the final quarter and further improve national and international marketing opportunities. In the quarter under review, the Agricultural Equipment business unit was able to match the good business development seen during the first half of the year. Demand for new tractors declined (down 5% year on year), but used machinery sales once again exceeded the previous year s high figure. A total of 1,333 used tractors were sold in the first nine months of 2015 (2014: 1,276). A rise in service business was also recorded, almost compensating for the decline in revenues from new machinery business. Revenues of million had been generated as at 30 September 2015 (2014: million). That being said, the operating result was unable to match the previous year, as greater pressure on margins in the sale of new machinery and an increase in personnel and IT costs had a negative impact. Compared to the aboveaverage figures recorded in the previous year, EBIT in agricultural equipment business declined by 4.5 million and stood at roughly 9.1 million after the first nine months of the current financial year. Innovations and new developments expected at the Agritechnica trade fair, which is set to be held in mid-november 2015, are likely to lead to a recovery in demand for tractors and agricultural equipment towards the end of the year. Group fruit trading activities benefited from the international operations of New Zealand subsidiary T&G Global Limited (T&G) and those of its subsidiary Apollo Apples Limited, which it acquired in December This year s record-breaking harvests with good fruit quality in New Zealand saw a rise in demand for southern hemisphere apples. As a result, the marketing season was excellent and trading volumes rose year on year. Together with the activities in Germany, where a slight rise in apple prices has recently been recorded, revenues in the business unit came to a total of million as at 30 September 2015, a year-on-year rise of 9.5%. The 6

8 increase in sales volumes, as well as the first-time inclusion of Apollo s earnings contributions, led to a significant improvement in the operating result compared to the previous year: EBIT rose by 38.6% to 22.1 million after the first nine months of the calendar year. While marketing volume from the current apple harvest in Germany is expected to fall compared to 2014, the supply of products from overseas within the Group is set to increase even further thanks to a joint venture for asparagus trading in Australia established in early August between T&G and Vizzarri M&G. Energy Segment in million Q3/15 Q3/14 % 9M/15 9M/14 % Revenues , , EBIT > Industry trends Economic development in Germany remained firmly on course for stable growth in the summer and autumn months, in spite of the huge numbers of refugees arriving in the country and the economic downturn in China. However, the German government recently slightly lowered its forecast for German economic growth in 2015 from 1.8% to 1.7%. This includes the potential implications of the Volkswagen emissions scandal as well as increasingly severe economic problems in emerging markets triggered by the slump in global commodity prices. The surplus in worldwide supply has seen the price of crude oil, for instance, fall by approximately one-half between September 2014 and September 2015; it is currently hovering around the USD50 per barrel mark. In keeping with this trend, prices of heating oil in Germany fell further to an average of approximately 0.57 per litre after trading under the previous year s levels throughout the whole of With prices continuing to fall, many consumers have already filled up their tanks, resulting in waning demand for heating oil in the summer months to below 2014 levels. Demand for Otto fuels between the start of the year and the end of July was also down slightly compared to By contrast, the positive economic climate led to rising demand for lubricants and diesel. As a 7

9 consequence, sales volumes in the industry rose by 0.7% and 3.5% respectively in the period from January to July. We are seeing a shift in the global growth focus in the area of renewable energies. Investment in the industry remained approximately on par with the previous year, totalling just under USD198 billion in the period from January to September The sharp rise in capacity expansion in emerging markets, particularly in China, almost matched the declining level of expansion in Europe compared to the previous year. Investment is also up in the US, driving on the development of power generated from renewable sources. The Clean Energy Plan was unveiled by the US government in early August and is likely to generate further impetus. This legislation requires domestic power companies to reduce their 2005 levels of carbon emissions by 32% by the year This is aimed at kick-starting the US energy revolution, supporting the expansion of renewable energies and ultimately fighting climate change. In this respect, industry experts recently raised their worldwide forecast for the construction of solar power capacity in 2015 to 59 gigawatts (GW). China is set to account for some 23 GW of this newly installed capacity. In Germany, however, photovoltaic (PV) capacity expansion remained down year on year at 1.04 GW between the start of the year and the end of August, even though private use of solar power is becoming increasingly attractive due to declines in prices of PV components. Only around 1.3 GW of PV output is likely to be connected to the grid in 2015, falling considerably short of the German government s capacity expansion target of approximately 2.5 GW. As a consequence, the German Renewable Energy Sources Act (EEG) provides for no further reductions in feed-in tariffs for solar power until the end of the year. However, the ongoing expansion of onshore wind energy in Germany could partially compensate for the decline in interest for PV plants. Some 1.1 GW of wind energy was installed by June, and the sector association anticipates full-year capacity expansion of at least 4 GW (2014: 4.75 GW). This would see Germany account for the third-largest share of forecast global capacity expansion in 2015, after US and China, with 54 GW of onshore wind power output. The German Federal Cabinet s approval of the draft German Combined Heat and Power Act (KWK-Gesetz), which provides for 1.5 billion in subsidies for new combined heat and power plants, is a further measure aimed at supporting the generation of clean energy. The global expansion of renewable energies could gain additional impetus as 8

10 a result of the United Nations Climate Change Conference, which is due to be held in Paris at the end of the year. Business development The Energy Segment comprises the Group s trading activities in fossil and renewable heating fuels, fuels and lubricants as well as its business in renewable energies, which is pooled in BayWa r.e. renewable energy GmbH. All in all, this Group segment saw its revenues decline year on year primarily due to the lower price of heating oil. Revenues of just under 2.3 billion were generated in the first nine months of the reporting year (2014: 2.5 billion). BayWa r.e. s leap in earnings in the third quarter, together with another rise in convention energy business, led to a year-on-year improvement in operating earnings of 35.1%. EBIT in the segment came to 33.1 million as at 30 September In trade with conventional energy carriers, sales volumes in heating business improved year on year in the first nine months of the financial year The consistently lower oil price year on year bolstered demand and resulted in heating oil sales rising by 5%. Sales of wood pellets also increased, by 11%. Sales of diesel and Otto fuels were on par with the solid previous year s figure at just under 1.1 million tonnes at the end of the quarter, whereas lubricant sales volumes declined slightly, unlike the general market trend. In total, conventional trading and distribution business recorded a 16.7% decline in revenues to around 1.7 billion in the first nine months of the reporting year, primarily due to price-related factors. The operating result benefited not only from higher margins in domestic sales regions, it also profited from the positive performance of Group companies in Austria. Correspondingly, the business unit s EBIT rose year on year by 3.4 million and stood at just under 7.5 million as at 30 September In the Renewable Energies business sector, 2015 has so far been dominated by project development activities. A number of wind and solar parks were commissioned in Europe and the US in the first half of 2015, before a total of 6 projects were able to be sold as planned in the reporting quarter. In July, BayWa r.e. s largest wind park project to date, the Beethoven wind park in the US (80 MW), was sold. In addition, the sales of the Trierweiler (4.6 MW) and Guggenberg (4.8 MW) wind parks, both in Germany, were successfully wrapped up, as was the sale of the Pindgewood 9

11 solar park (15 MW) near the town of Reading in the UK. The US and in France also saw the sale of 1 solar project each. Against the backdrop of this positive business performance, BayWa r.e. was able to more than double its revenues over the summer months to million as at 30 September This equates to a yearon-year increase of 25.2%. As expected, this business sector s operating result experienced even stronger growth. Revenues from project sales resulted in a sharp rise in earnings in the reporting quarter, putting EBIT over the first nine months of the financial year 2015 at 25.6 million. This equates to a year-on-year rise of 25.3%, even though the PV component trading business remains in decline with the exception of activities in the US and Switzerland. Other plants from the project portfolio completed so far this year are likely to be sold in the final quarter, enabling BayWa r.e. to exceed 2014 earnings by the end of the year. Building Materials Segment in million Q3/15 Q3/14 % 9M/15 9M/14 % Revenues , , EBIT Industry trends The German construction sector has been shaped so far in 2015 by a further increase in residential construction. A total of 140,435 new residential units were approved across Germany in the first half of the year, a rise of 2.6%, or roughly 3,600 units, compared to the same period in the previous year. That being said, growth was restricted to multi-family homes and multi-storey residential properties. One of the main features of this area of construction is the far lower volume of required building materials per residential unit compared to detached and semidetached housing construction. Permit figures for the latter two categories have hovered between stagnation and slight decline. The shortfall in terms of total revenues in the construction sector fell year on year to 2% in the first seven months of the financial year 2015, thanks to the sustained periods of dry and hot summer weather; this figure stood at 3.9% in April. The number of hours worked in the 10

12 industry in the period from January to July was down 3.5% on the previous year, which had benefited from an unusually early start to the season. Total order intake for companies in the industry remained on a par with the previous year in the summer months, while the decline in civil engineering of approximately 0.3% was evened out by an increase in construction orders. In this respect, industry association Hauptverband der Deutschen Bauindustrie continues to forecast real revenue growth of 1% for 2015 given current inflation figures. This forecast was also confirmed by a European Commission survey, which revealed that interest among private households in Germany in buying and purchasing homes has recently increased, as have investments in refurbishment, renovation and modernisation measures. The Business Climate index for the construction sector returned to positive figures in September for the first time since January Nevertheless, industry development between now and the end of the year will largely depend on the weather conditions in the coming months. Business development The Building Materials Segment mainly comprises Group trading activities involving building materials in Germany and Austria. The business unit has so far been unable to fully make up for the weather-related shortfall in sales in the first half of the year. Construction activities failed to reach the high levels of capacity of the same period in 2014, despite the warm and dry summer weather. Growth in residential construction has so far focused this year on multi-storey residential construction, which requires the use of fewer materials. By contrast, public-sector construction and commercial construction both declined slightly. The correspondingly low demand for building materials is also reflected in a slight reduction in building materials sales volume. At 1.1 billion, revenues in the Building Materials Segment were therefore down 3% on the previous-year figure after nine months of the financial year As expected, segment earnings were significantly positive again in the third quarter, with EBIT of 13.6 million generated as at 30 September This equates to a year-on-year decline of 3.5 million, which was predominantly the result of reduced order volume in private home construction and among homeowners. The consistently low prices for energy carriers in heating systems, such as heating oil, are alleviating any pressure to carry out renovation and modernisation, meaning that these measures are often 11

13 postponed until a later date. The onset of colder winter weather, however, could boost demand for this kind of redevelopment and lead to rising sales of the required products, which in most cases offer high margins. The 10,000 Homes programme unveiled in September in Bavaria, which is backed by 90 million of state funding, should inject additional impetus into innovative building and heating systems. Other Activities EBIT resulting from Other Activities comprises Group administration costs as well as consolidation effects and stood at 35.3 million (2014: 36.9 million) as at 30 September Report on the assets, financial position and result of operations Asset position As against the end of 2014, the BayWa Group s total assets increased by million in the first nine months of the financial year 2015 to 5,990.5 million. Group assets recorded a seasonally-induced increase in current assets mainly arising from harvesting activities. Non-current assets declined by 18.3 million to 2,086.0 million by the end of the third quarter of 2015, mostly as a result of the development of fixed assets. While intangible assets rose by 10.0 million mainly on account of the preliminary goodwill from the acquisitions of PC-Agrar Informations- und Beratungsdienst GmbH and Patberg International S.R.L., the same was not true for property, plant and equipment, which declined by 24.0 million. In addition to the scheduled depreciation of assets, property, plant and equipment as at 30 September 2015 was also reduced as a result of exchange rate effects. The fall in non-current assets was also due to the disposals of investment property as well as reclassifications to non-current assets held for sale. Furthermore, the reduction in non-current assets was caused by the fall in other financial assets from million to million, which was largely due 12

14 to a reduction in loans to affiliated companies. By contrast, an increase in shares recognised at equity was due to the continuation of profits at associated companies as well as a newly acquired participation in the BEEGY GmbH joint venture in the Renewable Energies business sector. Deferred tax assets also increased by the end of the third quarter, from million to million. Current assets increased in the reporting period by million to 3,898.2 million, mainly on account of the rise in inventories and trade receivables. The Agriculture Segment in particular recorded a seasonal rise in inventories, from 1,309.2 million to 1,456.1 million. This was mainly due to main harvesting activities in the last quarter, as well as an increase in agricultural machinery in the Agricultural Equipment business unit. In the Energy Segment, the progress made in many project developments in the Renewable Energies business sector resulted in inventories rising by 89.0 million to million. This was offset by the disposal of a wind farm in the United States, which was sold via project company Beethoven Wind, LLC. All told, inventories climbed from 1,986.3 million to 2,267.7 million. The million increase in current trade receivables to million is largely due to the seasonal expansion of business activities. By contrast, the decline in other assets, which mainly resulted from a reduction in Group companies commodity futures classified as financial instruments as well as the receipt of bonus receivables, had the opposite effect on current assets. At the end of the third quarter, non-current assets and disposal groups held for sale fell by 12.2 million compared to the end of 2014 to 6.3 million, mainly due to the assets of Raiffeisen Kraftfutterwerke Süd GmbH sold within the scope of an asset deal. The non-current assets held for sale reported as at the reporting date largely relate to properties intended for disposal. The equity of the BayWa Group has fallen by 31.1 million to 1,096.1 million since 31 December Net income for the first nine months of the year of 26.2 million is therefore offset by dividend payouts by BayWa AG and other Group companies totalling 31.6 million. Equity was also negatively impacted by currency translations differences as well as changes in the value of hedges. 13

15 Non-current liabilities climbed by 68.3 million, from 1,873.9 million as at 31 December 2014 to 1,942.1 million as at the end of the quarter. This development was primarily due to additional non-current financial liabilities taken out in connection with the expansion of project activities in the Renewable Energies business sector. The 20.0 million decline in other non-current liabilities is mainly due to a reclassification of non-current liabilities to current liabilities. Current liabilities climbed by million as at the end of the third quarter to 2,952.2 million. In addition to a rise in current financial liabilities to expand business activities in agricultural trade, agricultural equipment and renewable energies, this development is also due to higher liabilities arising from the seasonal increase in inventories. The disclosed liabilities from non-current assets held for sale/disposal group of 5.1 million reported as at 31 December 2014 related to the obligations of Raiffeisen Kraftfutterwerke Süd GmbH, which were transferred to the acquirer within the scope of the disposal of business activities. Financial position Based on consolidated results for the quarter which, at 26.2 million, were up 3.6 million year on year, cash earnings increased by 5.2 million as against the previous year to 94.8 million, mainly due to a drop in non-current provisions. A seasonal increase in trade receivables as well as inventories were offset, on the one hand, by a reduction in other assets not allocable to investing or financing activities as well as an increase in liabilities from operating activities. Taking account of declining provisions, cash flows from operating activities amounted to 23.7 million at the end of the third quarter of 2015, down million year on year; this is due in part to a more comprehensive expansion of agricultural trade inventories, as well as increased project development activities in the Renewable Energies business sector. Cash flows from investing activities at the end of the third quarter totalled 86.2 million. In addition to payments for company acquisitions, which mainly relate to PC-Agrar Informations- und Beratungsdienst GmbH and Romanian agricultural 14

16 trader Patberg International S.R.L. as well as the acquisition of an additional 30% of shares in Tecno Spot S.r.l., payments of million are attributed to investments in intangible assets and property, plant and equipment; these relate primarily to the Agriculture Segment. Cash inflows, on the other hand, result from the disposal of assets as well as the repayment of loans granted to associated companies. The 42.6 million year-on-year drop in cash outflows from investing activities is mainly due to a drop in investments in intangible assets and property, plant and equipment as well as a reduction in payments for company acquisitions. In cash flows from financing activities, dividend payments totalling 31.6 million were offset by long-term borrowing, which is mainly used for project development in the Renewable Energies business sector. Cash inflows from financing activities total 86.4 million, up 85.4 million year on year due to a drop in borrowing in the same period in the previous year. Total cash and cash equivalents have increased by 25.1 million since 31 December 2014 to million due to the incoming and outgoing cash payments from operating, investment and financing activities, with outgoing funds from changes in the group of consolidated companies and exchange rates of 1.3 million also being taken into account. Earnings position The revenues generated by the BayWa Group in the period from January to September 2015 came to 11,096.7 million. Compared to the same period in the previous year, this corresponds to a decline of million, or 3.0%. In the first three quarters of the current financial year, the Agricultural Trade business sector recorded a slight 51.8 million, or 0.8%, fall in revenues to 6,247.8 million. Declining grain prices due to high global harvest forecasts were largely offset by international demand for EU grain, which was up in the third quarter as a result of the weak euro boosting the competitiveness of EU grain. The Group benefitted from the new Group companies in Spain, Italy and Romania. A rise in sales of fertilisers was offset by a weather-related decline in crop protection. 15

17 At million, revenues in the Fruit business sector also rose, increasing by 41.0 million, or 9.5%. This was mainly due to increased sales figures resulting from a very good apple harvest at the New Zealand Group companies, boosted by the business activities of Apollo Apples Limited, which were included in the consolidated financial statements for the first time in the financial year Revenues in the Agricultural Equipment business unit fell slightly by 5.2 million, or 0.5%, to million. A drop in demand for new tractors was offset by higher sales of used machinery and a rise in the service business. Revenues in the Agriculture Segment in the first nine months of the financial year 2015 came to 7,688.1 million, down 16.1 million, or 0.2%, year on year. The Energy Segment saw revenues decline by million, or 8.9%, to 2,272.9 million million of this drop is due to conventional energy business activities on account of the significant year-on-year decline in oil prices. However, price developments resulted in an increase in sales volumes purchased by heat energy carriers. However, the Renewable Energies business sector saw revenues rise by million, or 25.2%, year on year to million. This was mainly due to the scheduled sale of 6 wind farms and solar parks during the third quarter. Revenues in the Building Materials Segment fell by 35.2 million, or 3.0%, year on year to 1,125.7 million. The weather-related drops in sales incurred in the first half of the year have not yet all been recovered. Other operating income of the BayWa Group has fallen slightly by 3.2 million to million year on year, while price gains were offset by declining income from asset disposals and income from letting and leasing. Taking account of increases in inventories, largely resulting from project developments in the Renewable Energies business sector, and other own work capitalised, the BayWa Group s overall performance fell by million, or 1.7%, year on year to 11,408.2 million due to 16

18 revenues. With a concurrent drop in the cost of materials of million, or 2.4%, gross profit rose by 50.8 million, or 4.7%, to 1,140.1 million. The 29.9 million, or 5.1%, increase in personnel expenses to million is largely a result of the business activities of Apollo Apples Limited, which were included in full for the first time from the start of 2015, as well as the additional personnel required for the new agricultural trade business activities in Italy, Spain and Romania. At 85.9 million, depreciation and amortisation of property, plant and equipment and intangible assets were down slightly on the previous year. Other operating expenses rose by 20.9 million, or 6.0%, to million. This was largely due to increased consultancy and legal fees, rental and lease payments as well as currency-induced losses and a rise in maintenance expenses. Energy and vehicle fleet costs, on the other hand, fell. As a result of these changes, the result of operating activities amounted to 65.0 million, up 1.8 million year on year. The result of participating interests declined slightly year on year by 1.0 million to 10.2 million as at the end of the third quarter of Higher income from participating interests recognised at equity was offset by lower income from shares in other participating interests. Adding the result of operating activities to the income from participating interests results in EBIT of 75.3 million for the BayWa Group for the period from January to September 2015; this equates to a year-on-year increase of 0.8 million, or 1.0%. Net interest rose by 3.6 million, or 8.3%, year on year to 40.4 million in the first nine months of the financial year 2015 from 44.0 million. 17

19 Including tax expenses of 8.7 million, this results in net income for the period of 26.2 million which is 3.6 million, or 15.7%, higher than the figure for the previous year. Employees At the end of the reporting period, the BayWa Group had a workforce of 17,178, which is 243 more employees than at the end of Most of these new employees, 215 to be exact, are employed in the Agriculture Segment. While the number of employees in the Fruit business sector declined by 79 following the end of the harvest period in New Zealand, the Agricultural Equipment business sector reported a rise in the number of employees by 208, which was mainly attributable to the acquisition of PC-Agrar Informations- und Beratungsdienst GmbH and the associated expansion of smart farming business activities. The number of employees in the Agricultural Trade business sector also rose by 86 due to the international expansion of business activities. In the Energy Segment, the number of employees rose marginally by 6 compared to year-end The workforce in this segment now totals 1,851 employees. While the number of employees in renewable energies increased by 22, the corresponding figure in conventional energies decreased by 16. In the Building Materials Segment, the number of employees fell by 2 compared to year-end and stood at 4,408 as at 30 September The number of employees attributable to the Other Activities Segment has risen by 24 to 610. Outlook The business performance of the BayWa Group is expected to remain positive in the final quarter of 2015, despite the particular challenges faced in German agricultural business. In the Agriculture Segment, existing wheat inventories in Germany are likely to offer solid marketing opportunities over the next few months. However, it remains uncertain what percentage of this wheat will be able to be sold. Grain prices are expected to experience sideward development given the positive supply situation 18

20 worldwide. This could lead to further offsetting effects in the sale of the harvest if farmers speculate on a higher price. Newly acquired agricultural trade operations in Spain, Italy and Romania should reach break-even following their planned start-up losses. Correspondingly, this will relieve pressure on the overall result. Dutch subsidiary Cefetra B.V. is likely to match the positive trend observed over the past quarters. Demand for operating resources will experience stable development. That being said, offsetting effects could arise, as the early purchase of seed and fertiliser usually only takes place once the harvest is marketed, if farmers liquidity reserves rise. There could be an end-of-year rally when it comes to fertiliser demand, as the prices for individual types of fertiliser, such as nitrogen, are extremely attractive. This could lead to increased warehousing among farmers in the coming winter months. The world s leading agricultural equipment trade fair, Agritechnica, is set to be held in November in Hanover and should inject additional impetus into agricultural equipment trade. The Agricultural Equipment business unit will fail to match 2014 s record-breaking figures, as expected, but should be at a similarly high level to previous years. The fruit harvest and marketing season in the southern hemisphere is more or less over. As a result, fruit business in the final quarter will largely depend on the harvest in the northern hemisphere. Apple harvests vary between regions in European growing areas. The dry weather conditions in the summer mean that harvest volume in Germany has declined by roughly 20% year on year; however, price development has improved. German fruit trading activities are also likely to benefit from this trend in the coming months. In the energy sector, it can be assumed that trade with heating oil in particular will increase once again in the winter months ahead. The below-average price level compared with the 2014 calendar year is likely to encourage consumers to at least fill up their tanks. We expect stable development of our business with fuels and lubricants. In the field of renewable energies, the period until the end of the year will continue to be shaped by project sales. Aside from the planned sale of 3 solar parks (roughly 19

21 70 MW) in the UK, another 13 major solar projects have already been sold to institutional investors from the insurance industry. Solar module trade in the US also offers additional earnings potential. The business performance of the Building Materials Segment in the fourth quarter depends strongly on weather conditions. An extremely dry and mild winter would be the only chance of matching the previous year s earnings level. The state funding programme for innovative building and heating systems in Bavaria is only likely to boost the ailing development of detached and semi-detached home construction next year. After a sluggish first half of the year, the BayWa Group generated a significant yearon-year increase in earnings in the third quarter of Positive business performance is also set to continue in the final quarter. Full-year revenues and earnings are likely to remain stable year on year in 2015 at the least. The statements and figures forecast in this document are based on assumptions and are subject to unforeseeable risk. In as much as the assumptions of the company should prove to be inaccurate, or should other unforeseeable risks occur, the possibility of the net worth, financial position and earnings situation of the Group diverging negatively from the target figures cited in this report should not be discounted. 20

22 Consolidated Financial Statements of BayWa AG pursuant to IFRS Consolidated Balance Sheet as at 30 September 2015 In million Assets 30/09/ /12/2014 Non-current assets Intangible assets Property, plant and equipment 1, , Participating interests recognised at equity Other financial assets Non-current biological assets Investment property Non-current income tax claims Other receivables and other assets Deferred tax assets , , Current assets Securities Inventories 2, , Current biological assets Current income tax claims Other receivables and other assets 1, , Cash and cash equivalents , , Non-current assets held for sale/disposal groups Total assets 5, , Shareholders equity and liabilities 30/09/ /12/2014 Equity Subscribed capital Capital reserve Revenue reserves Other reserves Equity net of minority interest Minority interest , , Non-current liabilities Pension provisions Other non-current provisions Financial liabilities 1, Financial lease obligations Trade payables and liabilities from inter-group business relationships Non-current income tax liabilities Other liabilities Deferred tax liabilities , , Current liabilities Pension provisions Other current provisions Financial liabilities 1, , Financial lease obligations Trade payables and liabilities from inter-group business relationships 1, Current income tax liabilities Other liabilities , , Liabilities from non-current assets held for sale/disposal groups Total shareholders equity and liabilities 5, ,

23 Consolidated Income Statement for the period from 1 January to 30 September 2015 In million 1Q2015 2Q2015 3Q /01 30/09/2015 1Q2014 2Q2014 3Q /01 30/09/2014 Revenues 3, , , , , , , , Inventory changes Other own work capitalised Other operating income Cost of materials - 3, , , , , , , , Gross profit , , Personnel expenses Depreciation and amortisation Other operating expenses Result of operating activities Income from participating interests recognised at equity Other income from shareholdings Interest income Interest expense Financial result Result of ordinary activities (EBT) Income tax Net result for the period of which: profit share of minority interest of which: due to shareholders of the parent company EBIT EBITDA Average number of shares 34,643,344 34,534,846 Basic earnings per share * (in ) Diluted earnings per share * (in ) * For the calculation of earnings per share, reference is made to the Notes in the Interim Report. 22

24 Transition to Consolidated Statement of Comprehensive Income as at 30 September 2015 In million 01/01 30/09/ /01 30/09/2014 Net income for the period Actuarial gains/losses from pension obligations and provisions for severance pay recognised in the reporting period Sum of items not subsequently reclassified in the income statement Net gain/loss from the revaluation of financial assets in the available for sale category recognised in the reporting period and other income from interests accounted for using the equity method Reclassifications to the income statement due to disposal of financial assets in the available for sale category recognised in the reporting period Net gain/loss from hedging instruments with a clear hedging relationship Reclassifications of net gain/loss recognised in the reporting period from hedging instruments with a clear hedging relationship to the income statement Differences from currency translation Sum of items subsequently reclassified in the income statement Gains and losses recognised directly in equity of which: profit share of minority interest of which: due to shareholders of the parent company Consolidated total result for the period of which: profit share of minority interest of which: due to shareholders of the parent company Consolidated Cash Flow Statement as at 30 September 2015 In million 01/01 30/09/ /01 30/09/2014 Cash earnings Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash-effective changes in cash and cash equivalents Cash and cash equivalents at the start of the period Outflow/inflow of funds due to changes in the group of consolidated companies and in exchange rates Cash and cash equivalents at the end of the period