Good morning, everybody, and I hope you can hear me now. We had some technical difficulties. Sorry for that delay. I wish you a nice morning and would like to welcome you again to BayWa's conference call on the results of the first quarter, 2023. You are probably aware that the changes within BayWa's management board took place and are effective as 1st of April this year, meaning Dr. Marlen Wienert is appointed as a new board member and responsible for the equipment segment and input business within the agri sector. Marcus Pöllinger, who is sitting next to me, takes the successor of Professor Lutz and takes over the role as BayWa's new CEO. I wish both of them all the best and of course, much success for the future. Today, Mr. Pöllinger will guide you together with Mr.
Helber, our CFO, through the presentation, and we'll be happy to answer your question at the end of the presentation. All relevant documents for this call have been sent out this morning and of course can be downloaded from BayWa's IR website. I hand over now to Mr. Pöllinger, and hope that the line will stay.
Good morning, everybody, and welcome to BayWa's conference call. Unfortunately, we can't look each other in the eye this time, but I'm looking very much forward to meeting every one of you at our Capital Market Day. I have met some of you last time when we had our meeting here in Munich. Before I talk about the business development of the first quarter, I would like to say a few words to you in my new role as CEO. Personally, I'm with BayWa for the last 15 years and my family roots back into the agri trade business. My great-grandfather founded our company in 1924, so one year after BayWa, and I grew up between fertilizer and grain. You can imagine that I'm very passionate about my new role and about BayWa Group.
I'm looking forward to the challenges in the newly formed executive board team with Dr. Wienert and my colleagues, Mr. Helber and Mr. Wolf. Please bear in mind that it was my decision to put Dr. Wienert into the executive board, and I'm very happy that the supervisory board agreed to that. I'm working with Andreas Helber for the last 15 years and with Dr. Wienert for the last five years since 2019. As a team, we are very well set. What can you expect from us? We had our first joint strategy retreat a fortnight ago in Berchtesgaden with the new team. The outcome from the two days can be summarized as follows: There are no fireworks or any revolutionary innovations with regards to our strategy.
The strategy cornerstones that we decided on under the chairmanship of Professor Lutz remain in place. What does that mean in concrete terms? The growth markets for BayWa are international agricultural trade and renewable energies. The focus remains on expanding the specialty business in Germany and abroad. There's a need for restructuring, of course, our domestic business in the agricultural department when it comes to inputs. This is an ongoing process. We are on a very good path here. We need to optimize the infrastructure because we have to adapt our infrastructure to the developing market of the farmers. The growth momentum in the renewable energy sector is undisputed. The planned sales of the Solar Trade is a measure to drive growth in this segment.
We made a conscious decision to sell the Solar Trade in order to strengthen the IPP and project business and to create a standalone finance structure for this area. As my Agra colleagues would put it, we are cutting shoots to be able to grow further. Let me say right up front, Building Material remains, of course, core business. There are no plans for regional expansion, but I see good opportunities to drive the construction business forward through vertical integration, as we have already proven in the past in our core region. Reducing construction costs by increasing efficiency is a lever for us and our customer. In concrete terms, this means shifting part of the value chains from the construction side to the protection hall.
As we can be seen in examples of Tjiko, the bathroom manual manufacturer close to Rosenheim, where we are building in a industry hall, wooden bathrooms. These are the future potentials in the construction industry in which we will participate. I don't want to go too far now, but I would like to present these topics as at this year's Capital Market Day and discuss them with you all. The main focus for the current financial year is the sale of Solar Trade, of course, achieving the earning targets of the group of EUR 320 million-EUR 370 million. In the current market environment, this is not a foregone conclusion, but the first quarter of 2023 forms a good basis for achieving these goals. This is a nice transition to look now at the Q1 figures.
It is great to see us get off to such a strong start this year. Let me start with the first slide in your presentation, the highlights. First of all, of course, a very strong start to this year due to the 2022 harvest and still high price level in our agricultural equipment. Please bear in mind that in this Q1, there is not one single renewable energy project sold. The EBIT decline versus the four year is of course the very strong first quarter in 2022, boosted by dynamic market developments, volume price indexes decreases in heat energy and carriers. We do see a decline in these prices in 2023.
Of course, a very unfortunate occasion which hit us in New Zealand, is a cyclone, the tropical storm in New Zealand, which destroyed up to 25% of our harvest area of our orchards. We are very positive that we will see an outcome of this situation in the next couple of weeks when it comes to the insurance claims and the strong domestic business and the new pack house, which was fortunately not damaged, give us good hope for a reasonable result at Global Produce. The most important thing in this year, of course, is the sale of the international business entity Solar Trade, which is even in the Q1 performing extremely good. On the next slide, you see a multi-year comparison of our EBIT, and this is what I mentioned before.
I'm very happy that we've seen such a strong start into this new year. Let me give you a deep dive of the market developments in the energy sector. First of all, the most important thing, how which markets are we expecting in the upcoming year. The global capacity installation forecast by region is extremely positive for the wind and the solar business, and does match perfectly to our business plan. Let's have a look on the results of the renewable energy segment. As I mentioned before, bear in mind, there is not one single project sold in Q1. For the first time, I think this underlines the strategy. The IPP business outperforms every other business in the group. Let's go to our energy segment in the BayWa AG or in BayWa Group.
Of course, you see a decline in EBIT due to the fall in prices in the heating market and the LNG business. Next slide, please show me the agriculture business. First of all, you see, of course, the development and price trend of wheat and rapeseed over the last two years, 2021, 2022. Of course, you can see this steep increase in prices due to the situation in Ukraine. We were very vulnerable and very proud of the new trading team in Munich. We were very well-positioned, and we participate to this day of the very well-positioned trading team of our business in Munich, in Hamburg, and of course, in Rotterdam with Cefetra.
The global trade balance, when you join BayWa for a couple of years, you're very well familiar with that. It's still tight. The market or the forecast for the harvest in Germany is very close to the year before. We are still in a tight market, which makes our products very interesting. Bear in mind, in the south of Germany, there's not a single other trader who can provide the amount of goods needed by the mills, oil mills and seed production as we can. Take another look at the agriculture business market development inputs on the next slide. You see that, of course, the crop protection and seed is delayed due to the weather. We didn't have very good weather in the first quarter.
To give you a flavor, normally it's just for the AG, we sell up to 300,000 tons of fertilizer till the end of March. We have now sold up to 210,000 to 90,000 tons, which is to be sold in the next couple of months. The very, very positive business, and I'm very proud of the team, is the agricultural equipment business. We had some problem with disruption of the supply chain To put it easily, to get the tractors on our, on our slots to make them ready for sale. We could sell more tractors than we actually get, but the team is doing a very, very good job.
Bear in mind, with the all the new regulations for Green Deal and the other things, you do need the mechanical instruments and equipment to work without or to be on the field, in the field and producing with less inputs. The fruit business, as I mentioned before, the German fruit business, as you know, is doing quite well. I'm quite pleased with this business. The TFC business, our business in the Netherlands, where we import up to 200 different exotic fruits, is of course, due to the situation in the retail a bit under pressure. But we do think that in the next couple of months we can see a silver lining in this business as well
As I mentioned before, the New Zealand business is, the harvest is now close to the end. Just getting sorry, some technical equipment here. Thank you. New Zealand apple harvest shows good results. We are very pleased with that. We do have been hit by this tropical storm, which means that 25% of our orchards will be replanted. Gives us the chance to replant them with new varieties, with our new project, Nouvel, and our new apples, like Tutti. Going to the next slide to Tefitra Group Limited. You can see that the EBIT is even to last year. This is two main points to be mentioned here. First of all, excellent trading and excellent execution.
It's not only the trading, it's the excellent execution, which is very important in this business, is working out perfectly fine in Tefitra and the new specialty business where we do trade all kinds of other specialties, except soy and grain. This business, like starch, is doing very, very well. This is, for me, a very good sign that the strategy, Tefitra Group is pursuing, is paying off now, and, it was the right way to go. The result on the next page of the agri trade and service segment in Europe shows an increase in revenues due to higher prices of the products and of course, a lower Q1 EBIT, but still a very, very good one beyond budget.
I'm very, very happy, and it shows that the strategy is working very well in this business. Agriculture equipment segment, as I just mentioned, due to price induced growth in revenue and profit. New machinery sales are up the roof. It's just wonderful to see, and it's incredible. Even in Canada and South Africa, business is doing very, very well. All our branches are operating very, very successfully. Happy to see that Global Produce segment. As I mentioned before, of course, we do see now this negative result due to all the indicators I just mentioned. We are quite sure that we will get this these results into a much better looking figure in the upcoming months.
There will be no problem in this segment. Building materials, as I just mentioned, building materials is as always a very slow start. What is maybe interesting is that we, as you know, have founded a couple of years ago, the BayWa Bau Projekt company, where we are building our own apartments and houses and sell them. This is up to EUR 10 million EBIT contributors. Even though the markets are slowing down in the building material, we are expecting to see the building materials business on budget. Please bear in mind there will be no carbon emission reduction in Europe and not in our market without a highly invest in building materials when it comes to efficiency for warmth and heating.
I'm very happy to hand over to my colleague Andreas Helber for the group financials, and I see you guys later for the Q&A.
Yeah. Thank you, Markus. Good morning, everybody also from my side. We have to switch Josko's mobile phone here because this is our way how we communicate with you this morning. Starting with the group financial, I think not many words to say. It's the first quarter. As we always indicated in previous years, this has a minor importance at all. The start is good, and this is a reasonable, as Markus said, a reasonable basis for the quarters to come. Overall, if we continue with the other activities on slide 23, it's more or less from the cost side in line, bit lower than the year before.
I know that you are always addressing the full year number for the other activities, which was roughly EUR 103 million the year before. If we expected the EUR 13 million, there might be some impacts coming in with 2024. That comes in a range of EUR 80 million. This is what I would expect for the full year, just to give you the flavor. Maybe a bit higher, whatever it comes. Within the first quarter, we had good inclusion of results from Austria Juice. This is our in Austria, in RWA, included company of participation with Agrana in the two sector. They are delivering good results this year, which was not the case the two years before, and some proceeds from real estate.
If you go into the summaries of the income statement for the business, the divisions, I think that summarizes all that Marcus brought before you here. On the energy side, you see the contribution, both entities, both segments. The classical energy and the renewables together. To make this very, very clear, once again, the contribution within the renewable, Marcus pointed that out, was only from the IPP business, which contributed some EUR 40 million and a very strong Solar Trade business in the first quarter that contributed another EUR 23 million, and that was brought down by some costs for the other entities to the inclusion of EUR 53 million for the first quarter. Project sales will come.
They will come in the second, third quarter and of course, at the end of the year. Also, important for us is that we go along with a very strong Solar Trade business. You can imagine it, this contribution is very important for the sale process. We are strongly looking on the performance also of the Solar Trade, which is looking quite good and was very strong momentum already in Q1. Overall, what we see on all entities, and that is also valid for the whole group, is that we have a very strong focus on the capital employed and which comes along with the higher interest cost this year. This will stay in the focus.
You see it also, if you look on the business entity summaries, that even we have, maybe also higher EBITDAs than 2021. 2022 is not the year I compare to because you have seen it on the first slide, and we always indicated that before that, the fact that we started with a positive quarter, which was not quite normal, and we saw it on multi-year comparison. For this year, we have to compare against 2021, and there in particular with the strongly lower financing and interest costs that we have seen there. This is something what we have to look at very carefully for the rest of the year that comes along with the reduced working capital and capital employed.
It will naturally be, being reduced from in Q3 and Q4 from the lower price that we see on the agri-agricultural commodity segment. You see the summary for the agri, the agriculture business as well, starting with the positive results, the building materials traditionally being a negative cost quarter. This has also been the year before or the years before. If you also look on the building materials performance in a multi-year comparison, it looks quite good for the first quarter. We will see what the remaining three will bring in. The summary on 27, that indicates what I stated at.
We have to carefully look on the EBT, the interest cost that brings the EBT down to EUR 14 million, which is still a positive result for the first quarter. Quite good, but of course, comes along with a doubled, I guess it's really a doubled interest cost for the first quarter. Comparing, of course, you know that the high interest costs that we have now to the very low that we had the year before, that would also be rebalanced over the remaining quarters. One look on the balance sheet, and that should be it. An increase of the total assets, seasonal taken, and this is mostly and mainly the shift of inventories into receivables from the crop side.
The higher contracted prices went out, brought a very good result for the agricultural trading business in the Q1 into the books, this will also continue. It's a little bit slowed down compared to years before. This will also continue into Q2 until the end of June when the harvest, the old harvest of 22 will gone. The current price scenario, we are down at EUR 225 per ton of wheat again, compared to EUR 350- EUR 380 the year before. The for the harvest 22, that indicates you how we are, we're looking on the working capital, also this is a quite good scenario for us when it comes into the new crop harvesting season. That is what we are looking at. That should be it, I guess.
It's, again, the first quarter, not dramatic changes also on the balance sheet side. I hand over again to whom I don't know, to Josko, I guess. We are then happy to take your questions.
Thank you, Mr. Pöllinger. Thank you, Mr. Helber. Now we are ready to take your question.
The first question comes from the line of Dr. Norbert Kalliwoda, calling from Dr. Kalliwoda Research. Please go ahead.
Yes. Thank you so much taking my questions. Good morning, yeah, much success for you, Mr. Pöllinger. Yeah. My first question is regarding CapEx and working capital. You explained that. Have you some details about the current figures of yeah, maybe April, or what do you expect in regards of capital, working capital and CapEx? Did I understand it in the right way that you like to reduce that for 2023? My second question is the tax rate, if it remains it the same last, like in the last year. Yeah, at the capital markets day, the last you said you are top three player in the solar distributors in the USA. Can you tell us who is number one and two? Thank you so much.
Yeah. Dr. Kalliwoda, good morning. I will take your question on the financial aspect from the working capital and the CapEx you ask. From the working capital side, what I expect, not having all the figures ready for April so far, and this is not a monthly view on it comes along with quarters. What we have seen last year was an increase on working capital, in particular on the agriculture business, due to the higher crop prices. That brought up the working capital by some EUR 600 million. This is what I expect to be decreased in the second half of the year. That will flow out. This is what we are currently seeing.
It's a little bit slower than the years before, as I indicated. The mills are still waiting in ordering the sold crop from the outlets. You remember it's already sold, but it's to ask if delivered now or another fortnight to go. That will at least be out, I expect, at the end of the second quarter. We just had our business review a couple of days ago, I asked the our chess trader if we expect to get with higher crop inventory into the new harvest and season. This is what he says. This is probably not. One can expect EUR 600 million-EUR 700 million being reduced in the on the agri sector after Q3. After Q2, sorry.
We have to look at Q3 and Q4 on the pricing situation, what the new crop will mean for the working capital level. This is the one thing. The others remain quite stable. I expect somewhat reduced levels, maybe by EUR 100 million-EUR 150 million, or EUR 100 million, at least up to EUR 100 million only, within the building materials sector. Where if the economy will further slow down, we have the first indications now seen in April, and this could be weather affected, but that could also be the first signal of a weaker development within the building material construction, which is in our plans already reflected on the EUR 320 million-EUR 370 million guidance that we gave.
These are the most, the main two trigger. On inventory, I do not expect strictly lower level within the agricultural equipment, which is very strong performing and we went into the new year with the highest order intake ever. You saw the results on the Q on the first quarter in the presentation. I think the main impact will come from agriculture crop commodities. CapEx will remain more or less stable. We do not reduce anything on CapEx, but as we said, we are already on a normal level there. The next question was on the tax rate. We expect the normal one with some 27%-28%, which is the normal average tax rate.
We have no indications that we have something to correct on that. What was the last question?
The last question. Third question I would take, Dr. Kalliwoda, about who is the largest distributor of solar equipment and installation supplies in the U.S. It is the number one is the CED Greentech Company based in San Diego, California. Number two is Fortune Energy based in West Sacramento. The number third, as we mentioned on the capital market day, is BayWa r.e. Solar Systems LLC. That will put the situation in the U.S.
Thank you so much. Very fine. Thank you.
The next question comes from the line of Markus Mayer, calling from Baader-Helvea. Please go ahead.
Yeah, good morning, gentlemen. Also three questions from my side. First of all is a question on the potential subsidized industrial power price, which was in the press basically since last week. How do you expect will this potential subsidized industrial power price, which is rumored to be at EUR 0.6 per kWh, affect your energy business? That is my first question. Second question is on this fertilizer trading business. How do you expect that the lost volumes there, will they be caught up in the remaining quarters of the year? As the fertilizer prices have fallen significantly to see a better demand in the second quarter, or maybe also indication for a third.
I know second quarter is not that important, but nevertheless, seasonally, in a seasonal picture, if you see a better demand there. The last question would be on the mentioned financial costs, interest costs. Beside this divestment, do you see any potential measures to reduce your interest costs? Are there any kind of ideas how to reduce them with green bonds or whatever kind of measures which have a lower interest rate than the market currently? Thank you.
Okay, thank you so much for the question. I will start with your second question concerning the fertilizer business. First of all, we were very well positioned, we didn't have too much of fertilizer in our own stock, in our own books, the decline in prices didn't affect us. The team has done a great job here. Your question, if we are able to catch up the 80,000 tons we haven't delivered yet, I hope so. If everything went very well, we will be able to catch it up, bear in mind, it's end of April now. We did already catch up a significant amount. I'm optimistic that we can catch it up, I'm not.
I can't be too sure about it because, sometimes if the farmers miss one, applying, they won't do it again. Maybe Andreas on the third question.
Yeah. On the potential measures to reduce interest costs, that's as I said, the crucial question that drives us all here. On the midterm and long-term run, I see, of course, the sale of the Solar Trade. That would from the proceeds that we expect, I'm not repeating my expectation, what we get in because I'm going to be blamed for by my colleague, Matthias Taft then again. You know what we are expecting. This is a EUR 1 billion deal, whatever it will come out. That will have the most impact on reducing the debt level and the incurred interest cost. The second measure would be, of course, reducing working capital. I elaborate on this one, on the agricultural equipment, my expectations on there.
The third one, what you mentioned, if we see any instruments on the capital market which are aligned to reduce interest costs, I would be very happy if you could indicate them to me. There are none. Everything that you can put on the capital market now is much more expensive than it was in the years before. The focus must lie on the asset sale on Solar Trade and other, let's say, Sorry. The sale of Solar Trade. Oh, boy. And the reduction of the working capital.
The first question, when it comes to energy prices, as BayWa is not into production or manufacturing, we are not an energy intense company, so this won't affect us.
No, the question maybe I wasn't clear with my question. The question was more if do you expect an indirect effect on your energy business? 'Cause I guess if for a part of the industry there will be a subsidized power price, this will also change the supply-demand situation of the energy industry in Germany at least. As such, there might be a negative effect on the energy business or even a positive effect if you also provide then businesses to energy-intensive businesses like the chemicals or steel industry. Therefore, I was wondering if there are any kind of direct or indirect effects.
We don't see currently any of these effects. We do supply, for example, a direct energy to the Schaeffler Group, where we just built a solar plant in front of the factory, which goes directly. The energy goes directly into the company with a fixed price. I don't see any direct effect on this.
Okay.
our business.
Okay, thank you so much.
The next question comes from the line of Sven Sauer, calling from Kepler Cheuvreux. Please go ahead.
Yes, hello. Good morning. I have only one question left, and my apologies if you already mentioned this in the call. You mentioned that in the agricultural equipment segment, you have a record high order book or order backlog. Then again, you're kind of warning that the market momentum could slow in the second half of the year, which basically we will enter in six or seven weeks. I'm wondering what the reason for that. Is it seasonal effects or do you see a structural decline in demand?
We don't see a decline. It's more seasonal effect. You have to bear in mind that we're still waiting for some tractors to hit our slots and the great figures of the Q1 results are the backlog of 2022. As I mentioned before, if the new technology or a future farmer needs a lot of technology because as less inputs as you're putting onto your field, the more you need tractors and special machinery. I'm very optimistic for this business.
Okay, thank you.
The next question comes from the line of Oliver Schwarz, calling from Warburg Research. Please go ahead.
Good morning, gentlemen, and thank you for taking my questions. Off to a good start, Mr. Pöllinger. Hopefully, this trend continues. Congratulations on that.
Thank you.
Sorry. First question that I have is in regards to the renewable energies business. On page slide of your current presentation, you stated that you're planning for approximately 800 megawatts of solar and wind projects to be sold externally in 2023. When compared that to the Q4 2022 presentation, it was stated that the project business should be in the vicinity of 2.1 gigawatts, including the IPP business in 2023, deducting 500 megawatts for the IPP business, which was highlighted. I would come up with a number of 1.6 gigawatts, so basically double of that what is now in the Q1 presentation. What am I missing here?
Mr. Schwarz, we're just checking the number because I'm not familiar with the figure mentioned in the last call. I'm sorry.
Mr. Schwartz, I think you're missing nothing. It is probably the actual, actualized change of what they have, the 2 gigawatts in overall to total production, which they will... What goes out is the external 1,800, and the remainder is what we expect to be put into the IPP. That might change from quarter to quarter, of course.
Yeah, but the state, I basically, that's the plan with me, that this is a moving target. Nevertheless, let's say that would imply if you, if we keep on heading for the 2 gigawatts in total external and external product business in 2023, that would give us, let's say, 1.2 gigawatts in additional IPP. Basically the 2 gigawatt target in IPP that was slated for 2024 would already been reached in the current year. Would that be a fair assessment?
Just
Here comes the expert. Wait. Oliver, out of these 1.2, I think 600, 700 megawatt will be transferred into the IPP sector but will not be finalized. Yeah. They will not be in charge at this moment. Yeah.
May I correct you, not 1.2, but 2.1.
2.1 is the total number.
Yeah. Right.
Including the external sales and the internal movement, the IPP sector.
Yeah. Right. Right. Right.
800 that are, 800 MW are the projects that will be sold to external companies.
Yeah. Which basically strictly mathematically speaking, would imply 1.3 gigawatts for the IPP.
Yeah. 1.3. Yeah, I know.
Yeah. Okay. There are six then that would be strictly projects in projects phase one to four somewhere, I guess, and the rest would be finalized projects. Is that correct?
Yes. Yes.
Okay. Okay. Right. Got it. Thank you for that.
Yeah. We can double-check again, of course, and we can call you back, but in general, it's correct. Yeah.
Okay. Wonderful. second question would be on the new hybrid bond. Mr. Helber, could you quickly put some flesh to the bone here? Basically, what your thoughts are in regards to volume, what this vehicle is meant to basically bring to the table in regards to BayWa's balance sheet, whether you will be willing to do more, let's say, equity related, let's say the emission of any additional equity related vehicle, whether you are fine with the EUR 100 million. Basically, that is a substitution, I guess, to the old hybrid bond that you paid back last year, but that was a volume of EUR 300 million. Now we are talking about a volume of EUR 100 million.
Could you just quickly talk us through your thought process that led to basically, the new hybrid bond? That would be wonderful. Thank you.
Mr. Schwarz, thank you. Thank you for the question. I did not expect the question from you, at least, I must say, because honestly spoken, I must say I was not very happy with the transaction as it came through, I must say. When we spoke about the markets with our banks over the last couple of months, and we also spoke to Warburg, and we Warburg came up and said, "Okay, what we can do for you..." We know that we had to repay our hybrid last year, which we did not extend for the market conditions that we faced in this period. The markets, the old hybrid was priced with a 4.18, I guess. Which was a favorable condition.
When it came to the due date at the Q4 perspective, it went up and there sometimes some day we went up to a two-digit number, which made it absolutely unattractive for to replace it by a new one, and we repaid it. Nevertheless, we looked on the overall situation and also Warburg came up with that and say, "What we can do is a kind of private placement with some, whatever, wealthy families or wealthy bonds traders." And I was not very keen on doing such a public placement as it turned out to be now at the end. Volume-wise, it would have been quite easy to place a bond of EUR 300 million. That was the market feedback.
We got very good market feedback, but of course not on the conditions that we went out with. If you look on the risk spread, which is lying on this hybrid bond and compared to the transactionfive years ago, this is the same one, more or less, given or taken into consideration the increased basic interest. The transaction was quite good volume-wise. If you would have gone up to EUR 300, that would probably not been within 8% or 9% or in the range of 9%, lower than what they indicated to have last year. Of course not nothing that I would go for giving the very high cost of it.
The volume of EUR 100 million, why was that chosen or what we also indicated with Warburg Research was a very simply simple rationale behind. Over the years, and you know that Mr. Schwarz, we lost some EUR 300 million on equity on the decrease of the interest rate on the pension liability. That has been reversed now over the last two years by some EUR 150 million-EUR 160 million, up to EUR 200 million in the range, and that will further continue. What I said, okay, we covered that equity more or less over the years, but there was a remaining portion of some roughly EUR 100 million, that was the idea behind it, going for volume on equity on a hybrid of up to EUR 100 million.
It turned out that the ticket size at the end of the day was for many investors too small. That was. Once again, I'm happy with the transaction, as I reverse myself now, how it came through. I was not, it was not planned to get over the 100 and, as it came into the end of the transaction, the feedback was very good. We could have done more. I would not have done it before because of the higher cost of the hybrid instrument. I'm happy with the development of the equity. We will see a reduction, or of the overall assets in 2023 already, and then we will see the huge impact on the equity coming from the sale of the Solar Trade transaction or the Solar Trade business.
There are no plans for further increases or further capital or equity transactions right now, in the light of what we see to come.
Thank you. Sorry for you not being, let's say, okay with how the process was managed. I was not part of the process, I have to confess, so it could have been worse. Just looking for, from a, from a fiber balance sheet view, when you, the emission of the last EUR 300 million hybrid bond was in 2019. You had a balance sheet total of EUR 8 and, EUR 8.8, EUR 8.9 billion, a net debt unadjusted of EUR 3 billion. You increased your or you hyped up your, your equity ratio by, the emission of that EUR 300 million hybrid. Looking, from the 2022 perspective, balance sheet total is EUR 13 billion.
net debt is in the vicinity of, again unadjusted EUR 5 billion. You're doing EUR 100 million euro hybrid bonds to replace the old one. Basically the question here is, why not more than EUR 300 billion? On the other hand side, why do the EUR 100 million at all?
No, we replaced the hybrid, which was EUR 300 million. I don't know if you said EUR 300 or EUR 400, which was-
EUR 300.
EUR 300 million. We replaced it already in the last year by a new short-term darling. Now this is the remaining portion of equity increase from the good results last year from the pension effect and so on. That was not the focus. It was more, you know, that it was more a market testing on what the market could give. I would probably with a coupon of 8% or 9%, not implementing a higher hybrid in a range of EUR 300. I don't have to do it. It's what we expect. You know what we expect from the Solar Trade transaction. That would increase my equity, the equity of the group again into a range of 20% plus. I said 24%.
This is, I think, nothing that we have to worry today.
Yeah. Right. Thank you very much for all the details, which leads me to my, at least for the time being, final question. When looking on your WACC calculations, that you provided with the Q4 or full year 2022 results. Would you have to adjust them or revise them, let's say significantly upward, in the light of what you have to pay for an equity instrument or let's say an equity linked instrument in the current year? Would that imply that the WACC has to go up from quite significantly from what you penciled in for 2022? Or is that not the way to look at it?
The WACC calculation will be performed by the end of the year in November on the November numbers and on the outlook of what we expect then for the capital markets to be. If I'm looking on the U.S. market, which is quite important also for the WACC calculation on our projects in the U.S., we have some bigger one there in the renewable energy. I'm pretty relaxed, you know that the inflation rates are reducing in the U.S. We have seen, and we all are well on the market, that the interest rates might be first cut already in the U.S. by the end of the year.
I do not expect a higher impact, or we will see what that means for the second half of the year for the European and the German market. We are overlooking this, and we are always in contact with, also with our auditors, on this issue. To summarize it, we do not expect a significantly higher WACC to come from today's perspective.
Thank you very much for that. Very clear.
Oliver, it's me again, Josko. Just, I looked up in the meantime regarding your 2.1 gigawatt. It's like following 800 megawatt are going to be sold externally. 1.2 or up to 1.2 gigawatt are going to be transferred into the IPP portfolio and into the IPP unit. Just 200 will be in place, and the remaining 1 gigawatt will be under construction.
Okay.
The 800 megawatt IPP business that you stated, at the year-end 2022, was that all already in place and operational, or was part of that also under construction?
That was in place, but that is not in place, this is in place in the last two years, I would say, the 800 megawatt. They are already in place.
Okay. Thank you.
The next question comes from the line of Knut Henkel calling from Pareto Securities. Please go ahead.
Good morning. Good morning, everyone. Thank you for taking my questions. I have a question on the balance sheet, on slide 28. That is, despite prices coming down and probably also working capital, it seems that the balance sheet of BayWa gets longer over time. I've looked into your balance sheet. It seems that the assets, fixed assets has increased, and the intangible assets has increased quite a lot, by 200 million EUR in equipment and intangible assets, 20 million EUR. That is almost the CapEx budget for an entire year. Maybe you can say, what is the driver behind that movement in Q1?
My second question would be on your largest segment, renewable energy. Maybe you can provide a little bit of a breakdown, how that splits into different buckets. You already mentioned that Solar Trade was around, if I got that right, contributing EBIT of EUR 23 million. Maybe you can also give an insight how much comes from IPP and from project business. That would be my second question. The third question, on inflation, again, maybe we talk every quarter on wage cost inflation, and you provided an update so far, no reason for huge concern. Maybe you can give an update what you see here coming this year again. Thanks a lot.
Thank you. I'm guessing for the first question, but I have to re-ask it because the connection is not very good here on the phone. The first one was on the balance sheet, on the increase of fixed assets. I did not got the second increase position. Was it the intangible or was it on the intangible assets I got?
Yeah.
Okay. The fixed asset increase and that was on the first thing is quite the easy answer. This is the switch from inventories to fixed assets from the IPP business. That all relates to assets that are reclassed from in work in process into the fixed assets line. On the intangible assets, I see the increase of some EUR 20 million that comes out of prepayment. I'm looking on my colleague here from the left side. I don't know exactly right now what that came through audit. We check it in between because that must be dedicated from one specific company.
The question, hello, welcome from my side. The question of the contribution to the EBIT of the renewable energy. As we mentioned before, not a single project was sold in Q1, so obviously no results from wind solar projects. We've got, let me look at the figures. EUR 42 million is the IPP and EUR 23 million is the Solar Trade. Of course, the costs are running against that, and that will... We will come to the EUR 53 million you can see in the presentation. Thank you. I guess there was another question we didn't pick up.
Yeah, the last one. We did not get the last one. Could you please repeat your last question?
Yeah. That was just a general question on wage cost inflation. How do you see it for the current year?
Salary payment, you mean?
Salary, salary payment. Yeah.
Yeah. Okay.
We are currently in the negotiation with the trade union, and we have priced an increase of a single-digit figure in % in our budget. We will see the negotiation within the next three to four weeks to hopefully be finalized. We can scope with that. As long as it is not over, I'd say, a figure over 13%. We will now see how the LVRD will finish its talks. We are optimistic that the increase we have priced into our budget will handle that.
Thanks a lot.
You're welcome.
Coming back on your first question with the intangibles, we are still looking at it. It was not in goodwill. We have to find out. There must have been some prepayments on a minor company transaction or something like that. We will check it out and send the answer to you.
Thank you.
We currently have no question coming through. As a final reminder, if you would like to ask a question, please press star one now.
Okay. If there are no further questions.
There are no further question indeed, so I will hand you back, Josko, to conclude today's conference.
Okay. Thank you very much, Marcus Pöllinger and Mr. Helber. Thanks, you as well, for your interest. We all hope to see you at our Capital Market Day on the sixth of July. The advantage of the Capital Market Days, we hope to see you all in present, so there will be no technical difficulties, I hope.
Absolutely, and thank you from my side, Marcus is speaking, that you didn't give me a too hard time on my first analyst call. Thank you for that one.
Thank you, and have a successful reporting season. Thank you very much.