Good afternoon, ladies and gentlemen. Thanks for joining our analyst conference on the results of the full year 2022. For the first time, this conference will take place physically and virtually, hence a hybrid conference. I welcome also the guys who are online, the financial community, as well as the analysts who arrived at this quite lousy weather to Munich and were not afraid of constant strike danger. At the beginning of the year 2022, many of us were quite optimistic and thought as Corona slows down, we will soon return back to business as usual. Unfortunately, this is not the case. Peace and economic stability seem to be far away, and as a consequence, the stock markets are pretty or extremely volatile.
Despite this challenging economic environment, BayWa has once again proven its successful business model and concluded the financial year with the record results. On February 28th this year, we released our preliminary figures, group revenues and group EBIT. Today, Professor Klaus Lutz, our CEO, and Andreas Helber, our CFO, will give you a deeper insight into the strategic and operational and financial development of each segment. After the presentation, we will be happy to take your question. I hand over now to Professor Klaus Lutz.
Thank you very much. Joško Radeljić, you are so serious. You are looking so serious today, and we have really today great figures. We go to the details. Of course, the pre-preliminary figures have been published already, but going also in the details, we will see how great the shape of this company is. Welcome for all the people sitting here in the 20th floor of our BayWa headquarter in Munich and also warm welcome for all the guys in the virtual world and my warmest welcome to Ann-Margret Croll from Edison Investment Research personally. This is my last one. Nevertheless, as I always said, we are the fun group if you talk about fun. If it comes to figures and business models, by the way, this is pluralis.
It's not only one business model. We are very serious. I would like, as always, to share with you more or less three big sections in this presentation. The first one is the highlights for 22 and the business development, the second one and the operational outlook as far as I'm authorized to do so, because with us is Marcus Pöllinger here in the second row, my successor. The CEO elect just one year ago. One year ago, he has been nominated and elected being my successor. Frau Dr. Marlen Wienert is also with us. She is the first female executive board member of BayWa, but highly qualified by what she did already. It's not a question of quota.
Maybe as well, because the legal construction in this country is as it is, but she's really highly qualified, and this is very important for her and for us. It's not a quota question, it's a question of qualification. Let's start with the highlights in the financial year 22. You know that already most important message is more or less all different business pillars contributed significantly to this great success. There's just one where we are a little bit under pressure, has to do with the weather conditions. I'm coming to that, of course, later on. That's the global produce business segment.
Also the global produce is in a profitable shape, and the agriculture energy, renewable energy, especially the building sector, all the businesses contributed to this great revenue increase up to EUR 27 billion. Who had an idea, any clue 15 years ago, as we had Mr. Müller, you were with us in the DZ Bank at this point in time, and Oliver Schwarz as well. We had EUR 7.5 billion revenue and a little profit, and today it's EUR 27. Of course, due to some great acquisitions we made over the last 15 years. Also the market environment was very positive for us in 2022.
In so far, for me, it was a surprise, of course, for you guys, because you are in the depth of the economically development in this country and all over the world. Maybe not such a surprise to deliver a half a billion EUR as EBIT profit to the capital market, to our shareholders and stakeholders. This has automatically, more or less, an impact also on the earnings per share. Last year, EUR 1.63, and for 2022, EUR 4.36. The logical consequence out of this is the increase of the dividend up to EUR 1.20 coming from EUR 1.05.
Out of the EUR 1.20, EUR 0.10 are an extraordinary dividend due to the great business success, which does not automatically mean that in next year, the 2023 annual report, you will see another EUR 1.20. My expectation is clear, but I do not want to share that with you because in a few weeks I'm coming back, 6th of June. If all is done as it was committed by all the relevant parties, I'm coming back and then I will share my thinking, my thoughts with the executive board. This is going to be brutal. Andreas Helber said already, "Klaus Lutz, don't make too much mistake in your wording. Don't be too brutal." Okay. These were the highlights more or less. Let's just go to the usual slides. You know that the comparison of the last years.
Of course, the average expectation is increasing, EUR 286.6 million EBIT due to the significant, really significant upside, which we have seen in 2022. More important is this slide. You know, this explanation of our expansion progress over the last years. In former times, we called it new business. Now we call it expansion because the share between the dark green and the gray part of the pillars shows a significant. I think it's a very important stability also of the traditional BayWa AG. This is the green, the dark green with around about 37.
If you go back, let me say 5 to 10 years, we always said the expectation is that the expansion will have 60%-70% of our profit, overall profit consideration and around about 30%-40% the classical BayWa, old, so to say, old business models. You see that, of course, in 2022, it's again the proof of the pudding. Nevertheless, the absolute figures are much higher than we were used to over the last years. The first thing we are going to look a little bit more in the details is our energy business. As you know, over the last 15 years, we expanded, we established, we implemented a lot of new business models in the energy sector, and here, especially the renewable energy business pillar.
Before we come to the operational figures of BayWa and BayWa r.e., let's have a look at the market development on a global basis. You see that we have still the trend in the installation capacity for renewable energies, wind and solar facilities over the last years. Looking forward, we have a similar development to expect. The CAGR is 24% over the last years. The installation is not at all at the final cycle or so. It's going to be increased over the next years as it was in the past. With other words, being in these businesses as a plant developer for wind and solar facilities is still absolutely valid.
The business model and the expectation also for the profit and revenue contribution of renewable energy for BayWa is not at all disturbed by any external events at this point in time. Interesting, on the right side of this slide, you see that our forecast we made again and again over the last years that the solar business is going to be much more important than the wind facility development is proven here because around about $300 billion were invested in the solar business, especially in the solar plants, and so the big solar facilities, and $140 million in the onshore wind energy sector.
Offshore is not here included because BayWa was not up to now affiliated and linked to the offshore business, which we are going to change in the future because we won, as you might know, 1 tender in Scotland, around about 1 gigawatt for offshore wind facilities. This sounds to us also extremely important to be also in this type of wind business for the future. It has, of course, also to do with the reallocation of the capital employed and capital invest in the solar trading sector. I'm coming back to that because we made a few weeks ago the announcement we are going to sell this multi-million, multi-billion business. At the end of the day, you will ask the question, what do you expect? What is the impact?
What is the purchase price? All these questions will be answered by my friend Andreas Helber , he's much more qualified. I have one figure in mind, but I'm not quite sure whether he is really aligned with that. Maybe my figure is too high or yours too high. maybe my figure is a little bit more real. I don't know. You will answer this question. I mentioned that now already because the journalists and all the reporters had this question, of course, at the end of the presentation, "What do you expect from this potential transaction?" Now let's go to the operational revenue and EBIT result for 2022. We have increase of 80% in the revenue, EUR 6.4 billion and EUR 240 million EBIT.
This result is mainly driven in 2022, and this is exceptional by the solar trading business, this business which we are going to sell. Of course, we had some benefits as well from the energy price development over the last more or less nearly 2 years. The project business, we sold 26 wind and solar parks in 2022, which was an output of around about 800 MW. In the previous year, 613. Our expectation was a little bit higher, but for some reasons, we postponed some projects for 2023 and also to be a little bit faster with the implementation of the IPP strategy. There's one thing I'm very proud of. This is the sale of the Bioenergy GmbH to Macquarie. I'm not proud of because Macquarie made this transaction.
I'm proud because we stick to this business. This was the very first transaction, was called Auf in Neue Energie in 2008, in the end of the fiscal year 2008. We were confronted with a lot of losses over the years, we stick to the business. We waited till it was possible after a very tough restructuring process to sell this and extraordinary profit, you see, is EUR 35 million. Due to the fact that we had the financial strength to continue with this business, at the end of the day, it's a happy end. EUR 35 million is not too bad.
This is very important also, or was very important for the for the business life of Marcus Pöllinger, my successor, because this transaction and the the first restructuring process, which was very tough, and also the decision that we are stopping all the biofuels and bioenergy activities due to the discussion fuel or food or fuel, we stopped it. It was not easy to organize this business unit to become a profitable organization. Marcus was in the beginning in this reorganization and restructuring process involved many years ago. The colleagues from Renewable Energy took it over, and this is the outcome. Now looking to the energy sector, with our fuel and lubricants and pellets and all that stuff, just the overall market consideration, I think you are familiar with that.
I need not to jump in all these price developments in the Brent crude price situation in 2022, and the same with the gas and the pellets. Interesting is the following. As you know, I say now again and again that the overall market for heating oil is shrinking. The very beginning was around about 2004, maybe you remember. Looking to this, the comparison 2021 to 2022, the volume, the tons sold to the market in our distribution area, 11 million to more than 12 million tons of heating oil. It's interesting so far because the market is shrinking. Nevertheless, due to the fear and the problems the customer saw, they really gave us significant higher orders as we were used to over the last years.
The market is shrinking, but the tanks were empty more or less, they bought more expected. So far the increase of 8% is interesting. On the right side, over the last years, I always said we are shrinking in the heating oil, we are benefiting in the pellet business. It's a more or less ex æquo balance. Here we have an increase in the heating oil, and we have an increase in the wood pellet development +10%. What is the outcome for the operational result for the energy segment in 2022? +57% in the revenue, EUR 3.3 billion, and the EBIT is EUR 53 million. As I joined the company, the people were happy already with a revenue to EBIT or PBT ratio, I forgot, of 0.5%.
They started to drink German Sekt. If they had 1%, champagne was distributed to the colleagues here. Now we are in a different scenario. From absolute figures coming, I never, ever expected a 53 or something like that result on the EBIT level for the classical energy sector. Interesting, by the way, is the fuel sales increased, okay, after Corona. Shouldn't be a big surprise. The decline in the lubricants business, really 10% is in so far significant because the lubricants or lubricants, depends how you want to pronounce it, is an indicator for the question, do we have an economic recession ahead or not? I'm not quite sure, is this more structural or is it more in principle a recession-based decrease?
Significant it's for our performance, but interesting from a economy point of view. Now we are coming to the agri business. As always, I start with the Cefetra Group based in Rotterdam. We come to the agriculture sector in BayWa, the machinery business and global produce. The overall market development, if you look to the global grain balance without rice, you see we are living, as we say in German language, from the hand in the mouth. I don't know, Mrs. Croll, whether I can say that in perfect Oxford English you are speaking. What is the key message? The key message is we expect a minus 15 million tons outcome for the storage. We do not really have a high storage for the upcoming months and weeks.
This means that we do not expect a decrease in the prices. Whether we will see a significant increase with benefits for our P&L statement in 2023 is also not very clear to me at this point in time because it has, especially to do with the open grain transit trading opportunity for Ukraine and Russia. Over the next 60 days, the frontiers, so to say, are open. The question is now, is it stable? What is the outcome then for 2022, 2023 in the harvest? Unclear at this point in time. Last year, we were faced with a downturn of 17% of the harvest in Ukraine. As you might know, we had some studies on that with our daughter company, Vista.
The question is now what is the, of course, the expectation also for our forecast from the grain business as a whole. We say it's more likely to have a flat, sideways development for 2023. Of course, it has to do with the Chicago Board of Trade. What are the hedge fund doing and so forth? Are they short seller in the market? At this point in time, it's more decreasing and flat, so to say. The commodity price development over the different commodities like wheat, corn, rapeseed, and soy meal, I do not want to comment on that in detail. You know that it was a very volatile market situation in 2022. We had a lot of benefits in the Cefetra Group, but also our agri business in BayWa. What is now the outcome?
This is important to understand and to comment. First of all, Cefetra made a revenue of EUR 6.1 billion, and the profit increased up to nearly EUR 60 million. Maybe you remember that our strategy was to have round about a sustainable, stable EUR 40 million profitability on the EBIT level for Cefetra. EUR 20 million coming from the commodity business and EUR 20 million should come from so-called specialties. What we here see is a much higher portion of specialties or niche products because we changed our strategy to become more independent on the dangerous volatility of the commodity business as we were faced in the past.
In so far, the investments we made in specialties, over the last years, over small companies in the Benelux area in UK, but also in Dubai with our Sedaco Group, shows us now that we have really a significant increase of the specialty revenue, but also the profitability. We were able to overcompensate a loss which we had to create, unfortunately, due to the war situation in Odessa with EUR 17 million. With other words, the strategy is also a perfect one. It is matching with our fundamental ideas and expectations internally to be more sustainable, to be more stable with the profit contribution in the future. Daan Vriens and his team located in Cefetra in Rotterdam, they are really doing a great job.
I'm also happy that our sesame export company, Sedaco, in Dubai, in the Emirates, is showing after one year already a small profit of 1.6 million EUR. I didn't expect it, to be honest, because normally, if you invest in any agribusiness, you need to be patient, you need time, and you need to be financially very strong. Otherwise, it's not easy. We come now to the market developments in our agri resources business. Of course, this is not a secret. You know, the fertilizer business in 2022 was very positive from a pricing point of view. We had our storage in the autumn of 2021, so we bought cheap, and we sold a little bit more expensive. In so far, it was the right decision.
Of course, it was a management decision and the right management approach. Nevertheless, from the volume, we saw a 7% minus in comparison to 2021. The same with the crop protection. We have a 8% decrease in 2022. Nevertheless, the link between the fertilizer price development and the energy prices is as it was also in the past, and of course, has not only to do with the Ukraine crisis because energy prices in the summertime 2021 were already extremely high. What does this now mean? This is indeed a surprise, I hope, also for you, if you are not too much in the details involved.
Our Agri Trade and service business, here, the German operation, Austria, Eastern Europe, and all the participations, Poland and so on and so far, we have embedded in the Agri Trade and Service segment. You see a revenue of EUR 5.7 billion and EUR 104 million EBIT. This is really a extreme exception, I would say. We shouldn't expect the continuation over the next years as a self-fulfilling model also, because we were very surprised. This has to do with the open book for the grain trade activities here in the BayWa. The second point is the success of the fertilizer trading activities and the supply chain management. The third point is the same with the crop protection, our friends in Austria are extremely successful with the compound feed manufacturing.
The acquisition in Serbia called Patent Co., which was a big one for our colleagues in Vienna, is also an interesting success already. It was an operational already running business model, in so far shouldn't be such a surprise, but they are in a better shape as we expected. The same with the seed. Seed was always a weakness in the past. Now, we changed, or Marlen and her team, they changed the product portfolio over the last year, and we have higher margin varieties now in our portfolio. In so far, the outcome was better than expected. It's not a self-fulfilling thing.
For the future, this extremely important because I saw some analyst reports this morning already, where you are calculating from the basis of 500 up to something, which is from my point of view, is leaving CEO not really realistic. This is also, by the way, the reason why you will get today the explanation of a guidance which we never did over the last 15 years. This is just to protect the new business, the new CEO, and the new members in the executive board, because we can't expect another 500 like this. Maybe there are some events which are going to support us, this is not absolutely clear and not to be expected at this point in time. Andreas Helber , are you happy with this explanation so far?
Yes.
Thank you. We come to the overall machinery and equipment development. This is pretty interesting because we have a great result, as you might assume. Interesting is the revenue has an increase for the market. This is not BayWa. The market in our distribution area, EUR 12.4 billion in comparison to EUR 10.5, so 18% plus. Round about EUR 30 million. The registration of the tractors is decreasing 12%. The reason for that is quite simple. Order intake extremely high.
Expectation from the farmers was indeed that they get the equipment, but due to the chip crisis, the broken supply chain, all that stuff, it was overall for the market not easy to deliver the products, the devices to the customers. What is the outcome? We have an increase of nearly 10% on the revenue side, EUR 2 billion, and the EBIT is EUR 17.2 million, an increase of 44%. We are more than happy. The different trademarks we are selling, the strategy is valid and still in place, successfully in place. Especially the service business, where we invested a lot of money over the last years, was running on a very high level in 2022.
Also the e-commerce business is going to speed up, not comparable with a B2C business, unfortunately. For B2B in a very complicated client surroundings and on the other hand, also very complicated products, I think the increase is significant. Machinery business also very positive development. We come to the global produce. Here you see the tonnage for the German especially fruit harvest was more or less stable comparison to 2021. New Zealand, we have a slight decrease, 3%. The quality and the especially apples, which is our key product in New Zealand, the quality, the size and so far was not as good as in 2021.
Now in 2023, we had the cyclone event, unfortunately a few weeks ago with a disastrous consequence for the people and also for the orchards and for the business over there. In 2022, we had some hailers and some very negative weather events. So far, you shouldn't be too surprised to see the following outcome. The revenue is more or less on the same level, EUR 921 million. The outcome, the EBIT, is EUR 21.1 million. We have a decrease of 50%. The reason for that is the volumes, the quality of New Zealand apples especially, but also the broken supply chain and the cost increase for containers, for vessels coming from Latin America, South America with tropical fruit products for the European, especially the German market.
It was not possible up to now to convince the retailers to accept higher prices due to the logistic cost increase. This is also the reason why in my other job, Chamber of Commerce, I'm still sticking to the statement that the inflation and the increase for goods for the customers is not at the end. I think that we will see another cost increase and so far a further inflation over the next 2-3 years. I'm more or less alone. We see in the back what is not yet overtaken, was not overtaken by the retailers from the cost point of view. This we see and we are faced with, of course, in our P&L statement.
We have higher costs, we have lower product quality in the apples. We had some problems from the supply chain management to get the tropical fruits from Latin America, like papaya, mango, Nashi. We have this 13%, EUR 2.3 billion. It's more or less flat, minus 4% on the EBIT level, EUR 17.4 million. The margins are a little bit under pressure, as I said. Interesting is that the BayWa Bau Projektgeber, so our project development for buildings is, was a strategic decision pushed by Marcus Pöllinger and his team, where I believe over the next year we will see here a sustainable, stable EBIT contribution of around about EUR 20 million. In this P&L statement, EUR 6 million are included already.
Of course, this will take a little bit time till all these projects have been fulfilled and finalized. Then we go to the market, and we are selling this. The demand in the areas where we are with our Bau Projekt, Bau Projekt, building project company in this area, the demand for new buildings and for flats, apartments and so forth is extremely high. It's still increasing. It's not. We are not in a re-relaxation mode in this point at this business. Very positive. We come to the last segment. That's always the same story. Unfortunately, we have always to announce here negative loss situation, negative figures.
This has to do with our investments in the different digitalization projects, the innovation projects, you know that we are investing a lot of money. Well, a lot of money. Some money in new proteins, plant-based proteins. We have the pharma's applications, cloud-based more and more, and this is a very long-term project. We are starting also to implement SAP HANA in the overall cooperation over the next years, which is also very costly. Without any further maintenance updates and releases from SAP, it's not easy to continue with the infrastructure we have. These are more or less infrastructure costs. This was the overall view now on the operational stuff, and maybe we continue now with Andreas Helber . At the end, I would like to explain the solar trade activity, or should I do it now? I wait for orders. What do you want?
However you want. We can just continue with the numbers.
We do it together. Yeah? Okay.
Yeah.
Please, Mr. Andreas Helber.
Good. Okay. after Klaus Lutz went through the different segments, seven segments that we have, I will summarize it a little bit and do the overall picture on the financials. As he, Klaus Lutz, already announced, give you a guidance for 2023 and for 2025. We have these unusual situation coming from 2022 that we already achieved the targets also that we announced for 2025. We have to discuss it, and we have to go through it, but I think it has to do with the management of expectation, and this is what we are going to do right now. Firstly, we'll have a final look on 2022 on the other activities. Mr. Oliver Schwarz, I know that you're actually waiting for on this slide.
The other activities, including all the costs, which are not allocated to the seven segments, to the operational segments, which are concluded here. In the other activities, it went up from EUR 80 to EUR 100. This is roughly the number I guess we also announced or communicated throughout the year. What is included here compared to the year before, that the biggest part of it was the inflation compensation that we paid with an amount of EUR 15 million in Q4 that was paid in December. It's, you know that we have in Germany this inflation compensation payment scheme of EUR 3,000 per employee until 2024.
Half of it we already paid in 2022 because we thought it would be worth to pay it now as the upcoming higher costs coming to the people. This was done in 2021. What else do we have? We have higher premium insurance from the D&O insurance, of course. That was Klaus Lutz already mentioned. The implementation of the new setup of our core system, of our warehousing system, changing from SAP to SAP S/4HANA, that has been set up firstly here in 2022 and bringing the first costs in there. Roughly, I guess, EUR 10 million-EUR 15 million also are included in these other activities portion.
Summing the three or the individual segments together to the business units that we report that we are reporting the business units for energy, for agriculture, and building materials, which is a very, very lean one. Starting with energy and putting it together, it comes up to roughly EUR 293 million in total. EBIT includes the portion, the big portion of for renewable energy and the extraordinary or the, yeah, I should say, extraordinary income on the classical energy business of EUR 53 million. If you look on the line for the last 5 years, what it is, it shows how exceptional the contribution of in particular the classical energy business was in 2022. This is important for me now also to manage expectation.
The classical energy part will be one who will drop down a little bit in 2023. Keep that in mind when we come to the overall guidance. Looking on the agriculture business, it's not that much far behind the energy if it comes on total. Compared to the EUR 290 that we have for the energy, we have the EUR 255 for agriculture, that was really, really surprising also for us. You see the performance over the last 4 years, 5 years since 2018. The contribution in particular of the domestic business here of our home turf, of our core business in Germany, in Austria, and we have to underpin that in Eastern Europe was outstanding.
Also here in this part and talking about the classical agriculture trade and service business, we have to expect a downturn in 2023 because we will not see the same fertilizer business that we had. We will not see the same input resources business that we had in 2022. I'm not so pessimistic, I should say, on the resources business. I think also what they contributed in 2022 was already made or seeded into 2021 because when the Ukraine thing started, all these harvest products from 2021 had already been sold. The good result was set in 2021 on that basis, and I think it's a similar thing to come in 2023 now.
First thing, we have a reduced input business in the first half of the year. We have to look on the second half of the year. This is the second part of the metal which we could not foresee right now. If you look on the commodity prices right now, commodity prices came significantly down compared to the beginning of the year or throughout the harvesting process of 2022. They are in a range of EUR 260-265 per ton right now, which last year it was in the range of EUR 300-330, something that way.
This is now the environment where we are going into the seeding process, the production process, but also then later on the harvesting and into the harvesting season. That could easily change from day to day. It depends on a lot of external factors like the Ukraine, Russia deal and whatever will influence it. It is for the time being, it is as it is, and in brackets, it's not the best-not the worst scenario for BayWa because what we need when we start into the new season, better lower prices than prices up. This is the overall picture of the four included with the contribution of also the agricultural equipment business, which is extremely high and a very good result also from Cefetra.
Klaus Lutz already pointed out with regard on the guidance to be founded for 2023, I think Cefetra business would be more or less stable. This is what we expect from today's perspective. Volatility will stay high. This would be a good environment for Cefetra's business. Global produce is quite too early to say what the outcome will be. You saw the 21. I think overall picture having this cyclone going over the island, I think everything is expectable from 0 to whatever it is. It probably will not be the 40 that they expected once. I think it will be more being reduced, that will be our one downturn factor for 2023 to come.
The agricultural equipment business was extremely strong in 2022, but we have seen the highest order backlog or the order backlog that we took over in 2023. I don't know where all the farmers are putting this machinery to, but nevertheless, that was how it comes through now. We will see how that will reflect into the 2023 results. This would also be a more or less stable or probably not in 2023 or 2022's fate performance, but it will be a good contribution coming out of that. On the domestic business, we must be realistic.
Also from looking on the first numbers coming in for the first two months from Austria and Eastern Europe, that was really partly a one-timer in particular on the fertilizer business in these regions. I do not expect that to come back directly again. We have the four of them, I guess. Did I forget one? No. On building materials, Klaus already mentioned it, EUR 70 million. I mean, Mr. Oliver Schwarz, you are following this business as well, and we always said in the past EUR 30-35, that that would be a good number. Look, it was EUR 70. It was a bit weaker than the year before.
As Klaus Lutz mentioned, the potential that we see in there, even we have the higher interest costs, we have the decreasing new permissions on 1- and 2-family houses. We see an upcoming volume on refurbishment and renovation again. Look what has been discussed from the European Commission in the last couple of weeks. Also this Protect business that we or Marcus Pöllinger and his team implemented years ago, been very successful in delivering contribution and as Klaus mentioned, the EUR 20 million to come until 2025.
That will be one offsetter in this part of the result. Bringing that together, now looking on the overall picture for 2022, the EUR 500 million that you know, and the new guidance that we already published this morning for 2023 is in a range of EUR 320 million-EUR 370 million. It should reflect a more or less stable business on the renewable energy side. We saw high contributions from, as Klaus Lutz mentioned, the solar trade business and the energy trading. We do not expect a really downturn on this business for 2023. From the first numbers coming in for the first quarter, I think this is more or less confirmed. I mentioned the one in the classical energy business.
If I look on the agriculture with EUR 255, I think there's a potential to bring it down by, I don't know, EUR 50 million-EUR 60 million in overall, the picture on agriculture. Also, the building materials is a bit more reluctant in putting its numbers out for 2023, but it will be a strong contribution if it goes to EUR 50 or EUR 55 or whatever it will be, it would be in such a range. Then again, we are considering on the other activities a number of a minus EUR 100. Why is that? We are going to pay in April again to our employees' anniversary bonus, which is for the 100th anniversary, and that will have a volume of some EUR 25 million.
We will see the implementation costs for SAP S/4HANA. They are now really coming up, and that is reflected in the other activities. I guess it's fair to say that we should expect it in the range of EUR 100 that we saw for 2022. We have a couple of offsetting effects, one-timers that we included in the other activities also in 2022. But I guess EUR 100 is a fair enough number to consider. Once again, for 2022, the outcome, the total outcome was EUR 320 profit before tax. A moderate tax rate of 25% brings it to EUR 240 on the overall net income on the group. Yes, of course, the earnings per share outstanding EUR 4.63 after all.
Looking on the balance sheet, equity ratio, a bit down from 15.4% to 14.7%, but we must consider that we repaid in Q4, in beginning of October, the hybrid that we had outstanding that was due from 2017 to 2022. We, in the beginning of the year 2022, we thought it would be a good idea to keep it and to prolong it and or to put a new hybrid in, into the gameplay. Throughout the year, and you all know that from the banking side, it became more expensive day by day, and at the end of the day, we decided to repay it. This is what we did in October that took us EUR 300 million on equity.
If you see on the absolute number of equity, it has increased from EUR 1.816 billion to EUR 1.909 billion. Of course, because of the net consolidated income from EUR 240 million, but also the other effects. One was the offsetting effect to the hybrid was the increase of the pension rate. We are back, I guess, at 3.7%, isn't that on the IFRS calculation coming from 0 point something? That gave us an effect partly offset by the salary increase trend and the pension trend, which has been partly offsetting it, but it was an effect of roughly EUR 100 million included in the overall equity.
Next year, I guess we should delete the equity ratio adjusted number because I guess we don't need it anymore. This has been considered in the past to show the effect of this pension rates ups and downs, and I think this will be getting out of the screen. The total number of assets, and you see that, increased by another EUR 1.2 billion, and that's mainly and absolutely by 2. It's more or less a good news for me. It's more or less driven by 2 aspects.
The first one was a higher volume of trades, of harvest trades, of resources that we took in all entities, in BayWa, in the Eastern German business, which is in the BRH Group, but also in Cefetra and in Austria, in RWA Group. They all delivered some EUR 700 million more on crop. Mostly price-driven. Remember what I said on the pricing side, it came up from 220 in the beginning to 300 something throughout the year. That already increased the number uptrend. It was not a volume thing, it was only a pricing.
These assets or these commodities are now flowing out throughout the beginning, the first 6 months of 2023, absolutely risk-free, already, mostly already sold. With a huge, or, or I would say pretty good, result potential also, cover is sleeping here in our books by the end of 2022. This is reflected in the in-increase of current assets as you see it from EUR 8 billion to EUR 8.5 billion or EUR 8.6 billion, increase in there. The other increase is the swap of projects that we made from within the renewable energy business. Remember that we decided to build up the IPP portfolio. We already started in 2022, of course, also because of the brilliant results coming from the energy trading and the solar module trading. We sold less projects than expected.
We took a couple of projects forward into 2023, securing also the 2023 result on the r.e. business, but also a couple of projects have been shifted into the IPP portfolio. This is reflected here in the non-current assets increase from EUR 3.8 billion to EUR 4.4 billion in total. That has been also included, of course, once again, in the long and short-term debt. Once again, the long-term and the short-term debt, if it comes to the resources that will flow out again over the year. Within the r.e. business, we expect at least one huge project being trained into a non-recourse financing roughly in the second or, yeah, the first or second quarter in 2023. Cash flow statement, you know all this picture.
The cash earnings strongly increased, of course, because of the high, the better volumes, the higher businesses that we saw. The cash flow from operating activities negative again because we saw the corresponding increase of inventory. You know how that works. Investments again pretty strong by some EUR 290 million overall, including partly of renewable, but also including investments here in our home turf business. Which is also quite important before we come to the to the solar trade transaction, the statement that which will have an huge impact also on the leverage situation. You see the leverage calculation as we are used going to do it. 5.3 increase of course of the inventories.
The rentable marketable inventories moved up from some EUR 800, or EUR 700 it was the year before, to EUR 1.2 by the end of the year. Of course, also the EBITDA increased and the adjusted net debt, the leverage, remains at 4.0. It was 4.1 the year before. Finally, the economic profit, and also this is what we showed to you the years before. You see, except for global produce, all entities, earned their cost of capital. You see how the capital increased in both the renewable energy but also the agri trade, and service side because of, the, yeah, favorable harvest situation. How should I other name it?
Building materials have been pretty stable over the years, but the outcome or the use of this slide is that they all earned their cost of capital. Klaus Lutz, you will now elaborate on the solar trade transaction once again.
Okay. To explain it again, ladies and gentlemen, we had this extraordinary analyst conference just, when was it? End of February, I guess. To repeat it, especially for many people on the phone, in the virtual area, why are we doing this? Because some of you could maybe ask the question, it's a booming situation, profitability is very high. What is the reason for this potential transaction? First of all, what is the business model structure? Models, pluralis. Structure of renewable energy. Building and projecting solar and wind facilities. That's the one thing. The other thing is solar trade for all these solar panels, especially for the residential market, and as a wholesale company for[Foreign language] , as we call it in German language.
Then the new one, and this was agreed upon with EIP during this transaction process to have a second investor in RE, was the IPP strategy to become an energy producer, which is brand new and completely new, which was not in our scope of business at all. We have, so to say, three to four. We have also the service business and so forth. In principle, three big business pillars.
The question is now, due to the market development, and you saw this extraordinary increase over the last years, not only operationally in BayWa, but also the overall global market, the needs for the customers, and also the demands for solar panels and projects and so forth, is increasing so quickly and so dramatically that the question is, do we want and can we afford all these different business models at the same time? What is the impact on our balance sheet, on the debt structure? What is the impact on the capital requirement?
Was our fundamental thought on this to do the same which we did 15 years ago, just to reallocate money, capital employed, capital invest in the business models where we are convinced together with our partners in Zurich that we have a chance to create a much more sustainable and stable business model from a cash point of view, from a cash flow point of view, and from a profitability point of view. We are really used to trading, wholesale and also B2C trading here in this company. It's an up and down. We know exactly at this point in time, it's maybe not yet an all-time high, but it's on high. It's maybe also strategically for some strategic investors very interesting to make a takeover at this point in time because they have the same need.
They need to increase in the markets. They need to increase the market shares on a global basis. Just looking to the US, for instance, there are two or three interested, really interested strategic partners. Also for PE, it's pretty interesting. We said we use the money coming from this to reduce our debt structure in the overall balance sheet, but also to create from our own the capital and the cash, the liquidity which we need for a faster progress in IPP and also the project business. Please take in consideration, years ago, Herr Schwarz, you were always with us, we had eight, nine, 10 gigawatts in the portfolio as options for projects, okay? There we discussed already, isn't it too much? Do we have enough workforce, engineers, project managers to make these options come true?
This was already a very big challenge. Now we have 24 gigawatts in the pipeline. Something has to happen with regard to the IPP, but also the speed of the project development implementation. We took the decision, we believe from a future perspective, from a stable business model perspective, it is much more interesting for us and also for investors to have a better calculation and to have a better basis also for the question, is the share price high or not high? Of course, it's never high enough.
I know I have to say that, from a share price development, the value of this company, looking from the capital market side to this development of the company, we said it's much more interesting also for investors to sell at this point our trading activity. The consequence will be money which we will get is reducing the debt. Secondly, we have more liquidity on our own to invest in IPP, which is a gentleman agreement. It's not completely and clearly fixed in all these contracts. We just said till 2028 that we would like to have 3 to 3.5 gigawatt in our portfolio together with EIP. The gentleman agreement between Roland Dörig
We have enough options in the portfolio. What is the bottleneck? Money, liquidity, but also the workforce still. This is the reason why we are buying all over the world little companies. It's, I know from a marketing and press point of view, this is always a great transaction. In reality, what we need are engineers and project managers and all the people from the workforce to realize these projects plus the liquidity. That's the background for this transaction. I explained that already during the last analyst conference, today there are a lot of new guys with us. The reason is really to refocus our E on our, we call it now, key business, because we want to have a more stable cash flow and a more stable profitability development.
This does not mean for potential investors, I have to say that of course, that we believe not anymore in this type of business. You can't afford all at the same time because the market is so rapidly growing much faster than we thought. Also the internal research was a little bit surprised that we have now this demand. Not in Germany alone, but the demand in Germany, as you can discuss, that's a political question. Many of you know my point of view to all these things. It's not the right time and the right point, the right place to make a judgment here. Okay. Also on a global basis. Look to Japan increasing significantly. Also, they are still in the nuclear power business involved.
In Indonesia, in Vietnam, in Mexico, Latin America, but in many European countries. So far, this is a valid business model, pretty interesting for a strategic buyer or a PE which would like to create a solar trading facility on a global basis or whatever. I think it's the right time now to go forward, to move forward with this transaction. Now the question is, what is our CFO, the big Andreas Helber, expecting? Because you will ask this question, right? Well, if I am completely wrong, we could be silent as well. Nah, maybe you explain a little bit what is the financial rationale behind this approach. Maybe we wait and see. Maybe they don't put the question on the table and we don't have to answer it.
No.
This will be a big surprise.
I have. Yeah, I answer this question. I guess we already discussed it in the analyst conference in March, and I have no better view on that today. From the rationale behind and from the numbers behind, this business is contributing some EUR 150 million EBIT on 2022. The EBITDA number was EUR 160 million. It's roughly a EUR 10 million difference in between. If you look on the transaction that we have seen in the market in the latest couple of months, multiples on that kind of transaction in that segment varies from 10-20. If you don't know it better, you take the middle of it, and then you can calculate what the expectation is.
It would be a 15 on 160. It comes out in a range of 2.0 to 2.4. This is the best guess that we have. This is what we. It's not put in a price ticket on the transaction. I think this should be it. The book value of the total business in our own books is EUR 350. You also see then what the equity impact would be beside, on the other hand, the cash impact. Finalizing that, and I forgot something to mention when we were on the guidance for 2023. I saw Mr. Oliver Schwarz. He was really disappointed on the numbers.
To make him more happy, we also worked on our guidance for 2025, which was released in 2021, being in a range of EUR 400-EUR 450. Of course, having the result on 2022 with EUR 500, we also overlook this guidance, and the new guidance for 2025 will be a range of EUR 470-EUR 525. You see, we do expect the result of 2022 being more or less the expectations for 2024 or 2023 and beyond. Of course in 2023, there will be a dip down, but once again, looking in 2025, that should pay out what has been seeded over the last 15 years. I think, that should also be mentioned here for being reflected in your thoughts.
Maybe a word to the schedule. We believe, we think, because we started the process on the management and leadership of Matthias Taft, our CEO of BayWa r.e., started this process together with bank and lawyers and all that stuff. It's a complex process in 24 different countries. If we have a signing end of this year, I'm happy, and closing depends a little bit on the approval situation with all the antitrust authorities all over the world, and maybe there are some other legal requirements between signing and closing. Closing, I think, will take place in 2024.
Thank you, Professor Klaus Lutz. Thank you, Mr. Andreas Helber. I think some of the questions regarding solar trade and guidance have been already answered. Nevertheless, I already got some question here online. Please, a small remark for all the online audience, you have to write down your questions in the chat box and we will answer it here. I will switch between the audience here in the room and the online audience. I would like to start maybe now with the first question from Markus Mayer, Baader Bank. Pretty long question. Given the low fertilizer storage level at Agro customers and delayed ordering due to the current wait and see behavior of buyers, how realistic is it that the demanded fertilizer could be delivered as needed as the logistics seems to be the key bottleneck? First question.
First of all, I don't see, due to the reach of our fertilizer business, I don't see a logistic bottleneck. What I was talking about was especially in the import from tropical fruits coming from Latin America or our fruits coming from New Zealand, Australia, especially for the Asian market. Here, I look to Marlene. We don't see a bottleneck. With other words, we are in the position to deliver all the fertilizer volumes to the customers. Also to make one thing clear, we decided also to buy fertilizers from companies who are either directly or indirectly held by Russian shareholders. There is one big company. Why are we doing that? Because we are covered by the Charter of the United Nations.
All things which have to do with the food security for people are allowed. Any sanction, that's my legal understanding, and I made my legal judgment personally, and I also take the risk for this decision, till Friday, 24 hours. That's a joke. Neither the volume nor the logistic is in question. The rest of the question was how might this delayed ordering. This is not the case. We don't see delayed ordering. We are in the first service, in the first quarter. Marlen, we were a little bit below the previous year, but this has not a real impact at this point in time for the forecast 2023. Don't worry about the fertilizer.
You didn't read the whole question. There's also the question regarding the margins potential on to 2023 full year level f ertilizer.
The fertilizer margins are over years under pressure. It has indeed to do with the volume. We need to increase the volume. Last year was an exception due to the energy price development. In other words, what we have on stock now, if energy and the production for fertilizer, this link leads to an increase of the prices, we have no problem with any discussions about the margins. If this is not the case, ongoing process as we have it right now, then the margins are under pressure, but it's not disastrous also. Don't worry.
Okay. Maybe the next question comes here out of the room. Dr. Hinkel?
Hello, and thank you for taking my question. I've three actually. First one on the guidance for 2025. You guided for a slowdown in agriculture next year, and at the same time you will sell solar modules trading, that's another gap to 2025. Will the gap made all up by the IPP trading by the IPP business that you are going to build up? That would be my first question. Maybe should we take it?
It's this one part and the other part is also the ongoing product development and selling business. Not all of the product that we develop goes into IPP. That will be a decision made by project, by regions, and by day by day, let's say this way. The downturn from the solar trade business in 2025 that we see would be compensated by the other businesses as I mentioned, particularly the solar product development business.
S olar module trading business is included still in the 2023 guidance, right?
2023, it will be full be in 2023.
This is what Klaus Lutz mentioned. We expect or what the ideal outcome would be a signature signing in 2023, but definitely the closing in 2024. This is how we planned it. The total outcome on the solar trade should be fully included in 2023. Then we have the huge one-time in 2024. By 2025, we should be ready from the increased IPP business and product development business, more of the pipeline being changed in 2024 to compensate and to offsetting the 2025.
Once again, if I take your guidance for 2023, EUR 350 million, roughly, deduct EUR 130, EUR 140. S olar module trading, I'm at below EUR 200. It should go up to EUR 500 within two years n ot to five.
To RE or for the whole business?
I'm talking about the group EBITDA.
Yeah
That's what I want to understand here.
Also the other business are contributing as well. Yeah. We expect a downturn coming in the agri sector. We're expecting a downturn coming in the agricultural equipment, but they will also increase until 2025.
Okay. Okay.
Maybe why is it such a long period of time till we believe we can get this deal done with the solar trade? It's a very complex situation. In 24 countries, we have a combined business in one legal entity, so we have to split that. That's the one thing. There are some tax issues which need to be solved by our specialists and all the advisors. This takes time. If you look back to the transaction period for the investment of EIP in RE, it took nearly two years. I don't expect such a long period of time, but it takes a few months till we have get our internal act done and that the data room is prepared for potential buyers.
I can tell you, after we made this announcement of our analyst conference, there was nearly an overrun with people calling also me. I know a lot of people in this business, and the same with Matthias and with Andreas Helber. This is the focus, of course, now, and our bank is handling all these applications and ideas and wishes and Klaus Lutz can we go for supper and so forth. If they took this all seriously, I really had some weight problems. I'm retired. I have too much time for eating, for food. No, that's not true.
Next question would be on global produce? You earned a negative economic profit at least in the current year. Next year, you didn't sound that euphoric, if I'm not mistaken. What is the future of this business within BayWa? What are your plans going forward? Do you take any measures to improve the situation?
Me? You?
I would not like to.
For the future.
For the future.
I think, listen, first, I think, you know, they have been really hit hardly by the cyclone now, and they belong to our BayWa family, and we care for them. What we expect, you saw the 2021 something for 2022. We were quite optimistic because a lot of these trees that we planted in the past are producing Envy that will come through over the next couple of years. We have now. We are overlooking the situation, at least one or two of our orchards might be hit that hard that we should not expect any outcome for that for the 2023 season. That should not be a structural damage over the, t hat they are all gone completely, but this is how we see it right now.
On the other hand, given the situation on the domestic business, they will probably, if you can say, benefiting from this situation. I do not expect a higher, at least a higher, result than we saw in 2022. There is a pretty good chance that we will see a downturn on the result from this 2020 it could be even goes against 0. This is my expectation for 2023. Nevertheless, it's not a structural issue. They will come up again. They have a very strong position. They made a lot of good investments in the past, consolidating the market, putting a lot of trees in the ground. We just opened, Marcus Pöllinger, you were down there.
We just opened a new pack house, a huge investment that will also benefiting from the situation that other competitors have in the New Zealand market. I'm not pessimistic on the outcome 2023 and beyond. For 2023, we have to take what it is. It's a natural catastrophe. We have to go through it.
Maybe from my side, more the challenge or the question to the new management will be due to the climate change, all these problems, because this has to do with all these changes in the world. The challenge, Marcus Pöllinger, for you guys and New Zealand based top management will be how should we and can we intense our business with China? There are some licenses to be paid from China to New Zealand or to BayWa, so to say, with regard to the planted Envy and Jazz apple trees. If you expand it, just a question, if you're going to expand it, maybe you can split the risk of producing prime apple products for the world. Maybe you can split it from a climate change point of view. Yeah.
This is one question you have to, from my point of view, then as chairman, you have to discuss and also to answer, because we had a similar situation in other businesses as well. For instance, the RE sector, the success has to do with a much more international approach, as some people thought we should go for. The same you have the global produce. That's one thing. The other one is TFC is indeed, also a problem due to the logistic problems, but also the European retailer started to invest money in the natural growing process. With other words, they are buying land. They are buying farms, and they try to produce all that stuff themselves. There are a few problems where we need to answer strategically the question.
First of all, are they really able to handle and to manage the logistics situation? My answer is no, because I know them back and forth. Let them go and they will see they will be faced with some problems. We could be the problem solver. Can I say that in English? I don't know. Okay. The problems, you know what I mean. That's the one thing. The other thing is, what should we do as BayWa? Should we invest in the natural growing process as well? Which we did now in South Africa, still under my leadership here. Was it Marcus last year, I guess? Yeah. We started to invest in farms or to support farmers in South Africa producing avocados.
Just to offer to the retailers in Europe, we are also able to provide to you such a type of, I call it service. Because for a retailer, the risk is really significant if you start to try to handle the full value chain and the full supply chain. This is really not so easy. We are specialists for the supply chain management and together with some farmers. Take, for instance, mango. We are one of the leaders for importing mangoes for the European market. Most of the mangoes are coming from Brazil. Peter Kooy, one of the co-founders of TFC, is the owner of the largest farm producing mangoes. The question is, what could we do else with such a guy and who is retired meanwhile, and he left TFC?
What could we do together just to offer to the retailers a full service package? Full service integrator or how you wanna call this type of business model. It's not only the question what's happening in New Zealand. One year is nice, the next year we have a weather problem, then the cyclone is coming around the corner. It's also the question, how can we enlarge our business models also on a global basis? The internationalization is one of the key answers. Of course, this is not solving a problem from one day to the other, but I am completely convinced it has the opportunity for the next three, five, four, six years that we see again a much better result in the global produce as we are faced with right now.
Last question from my side would be on your financial strategy regarding BayWa r.e. On one hand, you will buffer your equity now with the sale of the solar module trading business. On the other hand, I think the IPP business is much more capital-intensive than the solar trading stuff. My question would be, do you think you can grow the business as you plan to without any further capital injection into BayWa r.e.? In which way whatsoever? If that's possible.
Firstly, the increase or the building up of the IPP business on this project is mostly done on non-recourse finances on the project itself. They go up to 80% to 90% on project financing. Secondly, equity injections are planned for both partners in the RE. The next one will come up, I guess, in 2024. Both partners committed it to that one. Thirdly, I think the third aspect is doing this transaction and then completing it by the mid-term or by 2024. By mid-2024, we plan to get an individual financing circle on the RE business itself. We will put them out of the mother's financing circle and put them on their own feet.
This is also very important that we have them not only financed by the mother company, but making them to walk on the finance market itself. The next question comes from the online audience. Ladies first, from Ann-Margret Croll from Edison. Congratulations on the superlative results, and thank you for the personalized welcome. Personalized welcome. A personalized welcome. Has BayWa needed to make any significant capital investments to enter the offshore wind market? Why has BayWa not been active in this market previously? First of all, thank you very much for this compliment, and personalized welcome, that's meanwhile standard between the two of us, right? Good. Thanks for that. Maybe I answer the last question, why has BayWa not yet been active in the offshore market? The question is indeed valid. Yeah. Why now?
There are some answers. First of all, why didn't we do it? It was too risky. The capital intensity was much too high. There are technically some changes. More efficient windmills are available for offshore plants, and it's easier to handle them. As you know, I'm lawyer, but I just repeat what Matthias Taft explained to us. There are three, four points at this point in time, and the financing of these offshore plants is today a little bit easier as it was in the past. There are some banks in the world which lost a lot of money in spending some money, for instance, for offshore in the North Sea, for offshore facilities, was not really successful.
Due to the increase of energy efficiency and the easier handling of such offshore plants, the management and our technicians and engineers, they believe this is now not as risky as it was in the past. Maybe one comment to add. If we say we are going into the, or we are looking at the offshore business, nobody should expect that we are financing an offshore park investment. It's more or less throughout the project development phase, and it goes together with also from the initial investments with joint venture partners that we are looking for. This is how we look on this business. Then at a specific stage of development, we will sell this project on. Nobody should expect or be worried that we are going to build billions over billions offshore ourself.
Okay. Thank you. Next question comes from Oliver Schwarz, Warburg Research.
Gentlemen, congratulations on the very good results for 2022.
But.
Ah, but. I'm-
It's possible.
I'm always intellectually challenged by the outlook you provide. 2023 is no different in that regard. First set of questions is basically only on the renewable energy business. You put out a guidance of 2.1 gigawatts for this year, which includes the IPP business. The IPP business goes from 0.8 to 1.3 gigawatts.
Basically, that leaves 1.5 GW for the project business, which is not, let's say, catering to the IPP business. Last year, we had almost 800 MW sold, so we're talking more or less of a doubling of volumes here in regards to megawatt. We're still looking for an EBIT, you said, likely to be stable, and your report says slightly declining. I guess the guidance in the report is a bit more dated than your current outlook. Let's stick with equal. You double the volume, but you come out with the same result. What is pressuring your margins by 50%?
I don't know. I, yeah, I know the EPS, and I don't know the breakup of project development or project sales, IPP and energy trading. What I know from the overall, what we included in the system or what RE included in the system, this is a rate of 225 to 230, 240. This is 239 was the last year's result. This is what we indicated in the slightly decrease. I'm really, I can't answer the question on the project. If there are pressure on the individual projects, we have to put this question to RE. This is I'm not the RE guy. Definitely I don't know. If they have the mixture of what they put into IPP or what they put on sale, yeah.
We don't need to dig that deep. I mean, you said. The numbers indicate an increase from 800 megawatts to 0.8 gigawatts to 1.5 gigawatt this year. The result remains the same, which seems to point at a huge pressure on the market. On the margin.
I mean, you probably will not have the same result on the energy trading this year that we saw in 2022.
So-
This is probably the answer is, we had a contribution of EUR 120 million on the energy trading, which is not solar module trading, which is the energy trading.
Wasn't energy okay, sorry.
Energy, yeah. It's not trading.
Yeah.
Yeah. This is when we How when we trade the own produced energy and the BayWa's energy, yeah? This will probably.
Yes.
slow down in comparison to the
This is the case.
Yeah.
We stopped due to the margin calls requested from the stock exchange, we reduced this type of business model significantly, with the exception of the energy we produce on our own.
Yeah.
We need for the PPA business for the project development. This is where I am not in the details, but I assume that's the only reason to explain this decrease or the flat development you mentioned. This is the only one, because this, Mr. Kemnitz, is nodding, so we are on the right path.
Oh, it's good to be here, Andreas Helber. It's really good to be here.
No, because this was for me, the CEO said, "This is too risky. We have to stop it." We discussed it with the financial guys, of course, with Andreas Helber and the management of RE. Everyone was happy about that because the market potential is still valid. Margin calls are so risky. Look to the energy company in Vienna, what happened over there. We need not to have a similar crash situation for this business because this is not really our origin business. We are not really experts on margin calls and all that stuff. This was the reason why we stopped it completely.
We stopped the exchange business.
The exchange.
We are still doing the OTC business.
OTC.
That has a lower volume. It's roughly in the range of EUR 40 million I don't have the details right now, but that could be the gap-
That's it.
on the EUR 60 million from the exchange.
That is a very good question. My compliment, Mr. Oliver Schwarz, to be honest, but you got an answer.
He's prepared the whole day.
He's prepared all the day. We don't have the time. We have to take care of customers.
Come on, come on, come on, guys. Second question is in regards to your IPP target. In the summer at the Capital Market Day, you stated that you want to realize two gigawatt in 50 projects by the end of 2024. You're now heading for 1.5... Sorry, 1.3 gigawatt in 2023, which leaves, let's say, another 700 megawatt for 2024. I didn't see this target to be repeated in the annual report. However, I saw a midterm target of three gigawatt. Would that be the target for 2025, which basically aligns with the guidance of 2025 in regard to EBIT? Or is that planned for a later stage than 2025?
The overall target to add 2.5 to 3 to the existing half gigawatt that we had, that was the target until 2028, the original one. Now we are speeding up and, of course, also with the our friends in Zurich, they want to see us to put more megawatt in that. That could be go up to 3.3.4-4.
We said 2025.
By 2028.
And it's-
If you took that by 2025, I would be happy to have the three in 2025.
This is also the reason why we have to sell SolarTrade, because we are much quicker in the path to 2028. Now 2028 is more or less, to make it simple, 25. So far you need more capital. We need this also to close the gap, forget about the extra, extraordinary income which we will have in 2024. If we sell successfully our SolarTrade, then we need this to mitigate the potential gap.
Understood. Basically my next question, probably the last one in this set here, is on the financing and on the capital requirements. At the moment, you have, like, 800 megawatts of IPP capacity online. You, Mr. Andreas Helber, I heard you say that it comes to financing, this is mostly financed via the non-recourse.
EUR 400.
Yeah. That is only EUR 400 million. Normally from, let's say, other providers I know, they will leverage up their projects to 70%-80%.
Yes.
The project is normally, let's say, EUR 1 million-1.5 million per megawatt, which would indicate, let's say, capital requirements, of the 0.8 gigawatt of give or take EUR 1 billion, right? Only EUR 400 million of that is in non-recourse. Why don't you use, let's say, the industry standard leverage, but put more equity in the business?
This is exactly what we are going to do. looking on comparing the 0.8 IPP that we have with the non-recourse, you must keep in mind that roughly 450 megawatt was from this La Muela project. They were already there. Yeah. This gives a huge impact on the megawatt, but that has been already financed. I don't know how, but not on non-recourse space.
Okay.
You're absolutely right, and I think I mentioned it, that we are leveraging or non-recourse finance on future projects will be in range of 80% to 90% on non-recourse basis. We will start with the large one, which is currently... Matthias is just coming back from the US, the big Strauss project, the wind park for Strauss. They will transfer it. Like, it's a 250 or 300 megawatt project that will be transferred from into IPP now during the first half year.
Yeah. Wouldn't that impact, let's say, a very limited capital exposure or requirements for equity from your side? Just looking at the current year, 500 megawatt of additional capacity would equal perhaps to EUR 700 million in capital. 90% of that via non-recourse, that would leave you with EUR 70 million i n equity?
Mr.Oliver Schwarz , I'm absolutely with you, but I'm not looking on this transaction to make renewable immediately to move on to spend this money again. We talked about reduction of our debt situation, repayment on the working capital on the solar trade, which is also up to some EUR 600 million. If they need smaller equity from their perspective, smaller equity out of this proceed from the transaction, I would be more than happy. This should not go into IPP financing. This should allow us to put more speed in the transformation of the pipeline from projects into selling projects or available for sale projects and IPP projects. This is the working capital finance which sits behind the proceeds from the solar trade.
Understood. I go back in line. Thank you very much.
I'm going back to the online questions.
We go step by step.
Yeah, we go step by step. From Guido Hoymann, Metzler Bank. Can you provide us with an update on your renewable development pipeline? I think we answered this.
We said that 24 gigawatt and the split, you had the figure in mind.
16 solar, 8 wind.
The overwhelming part, the maturity, so to say, is solar.
As we always said.
No change.
Second question, agricultural technology. Once the subsidy program Bauernmilliarde has come to an end, will there be a multi-year since all farmers are fully equipped then?
Will there be a multi-year since...
That's an interesting question because it's very rational, the question. The farmers are not always rational in their behavior. What is the reason? Why are they... I'm living countryside, and I'm surrounded by friends, customers, not always friends. Depends. The reason why they are still buying very expensive equipment, and equipment means especially tractors, of course, is to protect their private and personal wealth. Quite simple. It is as simple as it is.
Because from a technology point of view, in Central Europe, more or less all farmers or nearly all farmers, not always 100%, but nearly all farmers are, from a technology point of view, highly equipped, some over-equipped. So far, Bauernmilliarde, of course, was a subsidy useful for us. I do not believe that this is so crucial that at the end of the day, we'll be faced with a crash in the machinery business. I don' see that. No, it's okay. Approved.
Thank you. Third question. Net debt went up quite sharply. Is the IPP expansion the main reason? Will this lead to ongoing negative cash flows in the coming years?
The main reason was the very strong grain business that we had taking all the harvest in by the year-end. The second one was the repayment of the hybrid that has been offset by an increase of the of the syn loan facility by EUR 300 million and placement of Schuldschein .
Okay. Is there any other?
Far not. I would like to ask the audience here.
The next one.
How-
Mr. Oliver Schwarz.
What a surprise, Mr. OliverSchwarz again.
I'm so very sorry.
No, no. I like it. Basically, I like it only if we have answers.
Are you not entertained? Yeah, I like to stray a bit from the renew. Maybe not initially. Quick one on that one. Can you give us a number on services in 2022? By mid-year, you said it was around 10 gigawatt that you are actively servicing. Is that still the number, or has that increased by over a year to year end? No. Okay. Cool.
By the way, we are not very happy with this business currently as it, as it runs. This is not where we want to have it. size-wise, it's, it has not increased, dramatically. I guess. I don't know if it has at least, increased, by the end.
Okay.
We are still in a loss situation.
The unit is going through a deep restructuring process. Management has been exchanged. Was a little bit disappointed by the service department because I was always, over years, convi nced this will have a similar development like in the computer industry, where at the end of the day, the services maintenance is much more profitable than the rest of the business. This is not the case here.
Yet. Maybe it's coming.
Okay. Some simple questions on the other segments, please. Firstly, building materials, was the increase in sales only price-driven, given that the costs of raw materials have increased quite dramatically and you obviously had to pass on those prices? Were volumes down actually in 2022, sorry.
I assume the volumes were more or less stable. It was really a price trigger when it came up from 2021-2022. You remember that in particular, specific building materials, wood, steel, name it, they went on dramatically. That's. The good thing for us was, and I think this is also the outcome for the good margin that we achieved, that we were able to supply, that we had the stock on hand. Yeah.
You know I love this segment, others, so obviously I have to ask a question in relation to that. You stated that the inflation compensation payment was included in the other segment, and we'll also see in 2023 the one-time payment for the 100th anniversary of BayWa in that segment. Why is that the case? Why is that not in the segments where the employees actually are basically included? Why is that in the other segment?
we would it was a decision made by the board, by the executive board within during the congress of this year. All the operative guys have their targets, they have their bonus payments related on these targets. We kept it out of it, and we keep it in other activities, not spreading it over the old people.
It was a very quick deal, between the executive board and the chairman of the works council. If you start and it was more or less in the last quarter, if you then start to discuss with the operational management whether you have to deduct this million blah, blah that you achieve your goals, this is. We were nice to the operational guys, I would say. That's the reason for that. Last but not least, the EBIT loss in agricultural trading and services in Q4 of, give or take, EUR 50 million. How was that compiled?
What we already anticipated throughout the year was a write-down. Not throughout the year, I would say. Throughout the third quarter already we discussed it. There was a write-down of inventories in fertilizer. Prices came down by the end of the year, so we took a provision of EUR 9 million, I guess it was, in fertilizer. EUR 8 million? EUR 8 million on fertilizer. We took another provision on crop, which was came out through the audit by two and a half million. What else?
1.6. seeds, I think.
Yeah, seeds. A lot of... A couple of things coming out through the closing process of the financial year, which is quite normal. Normally, we have on the agri side, if you look on the agri trade and service side, the final quarter, in particular final months, is a cost quarter or a cost month, so that should not be seen as an unusual thing. Coming from the... We reduced the order intake on fertilizer dramatically throughout the season, but nevertheless, that was due to have it by the end of the year.
Okay. Perhaps last one in that regard. Obviously, your interest payments almost doubled in 2022. Looking into the current year, what do you expect in regard to your interest result in 2023?
Yeah. We have seen the basis effect, or the base effect here throughout 2022. My best guess is that we have another increase of, roughly, let's say EUR 55 million-EUR 60 million to come from the interest rate. I think this is the increasing effect from the basis. I think we are almost through at the rate that we are now. Next, maybe expecting another slow step in, coming in in May, but I think that should be it then from the increase side. I guess we have an offsetting effect from the inventory side with regard to the grain. I do not expect the similar price level that we had when we came into the harvest season, this year. That should, offsetting the capital requirements and, by the mean also, the interest expenses.
Yeah, would that be, let's say, mixing up cash flow with earnings here? When you say you have a working capital release in grain and on the other hand, you have the interest result because the working capital decline in grain would have no P&L impact basically, right?
I have to finance the harvest.
That's correct. You basically think by the reduction of the working capital, net debt would decline?
Yeah
... to the extent that it would reduce interest payments by EUR 55-60 million.
Yeah. Not reduce, increase.
Increase, sorry. We have, you know, I think we have doubled, or roughly, nearly doubled, the interest expense throughout 2022.
The increase actually started in the second half of the year. This has a base effect on 2023. If it comes on this level throughout 2023, I will have higher interest expenses to come. That could be partly offset by lower requirements or from the inventory side.
This is what I meant, k eep in mind we're going from this, what was it? EUR 180 million total interest expense that we had in 2022. I would assume it goes up to EUR 250 million to EUR 240 million, something in the range of that. This is what I included in our simulations.
Okay.
Yeah.
Thank you. I go back in line. I have here a further online question from Axel Herlinghaus, DZ Bank. I think it's a very important one that we have to clarify. Just for clarification, the medium-term guidance for 2025 is for operational, if it means just for the three operating segments, excluding other activities in the innovation segment?
No, all in. It's the guidance is all in both years, 2023 and 2025. Once again, it goes, as I said, for 2023, EUR 320 million-EUR 370 million. You make me completely nervous. EUR 320 million-EUR 370 million. I think there is more an uplift in that. The guidance for 2025 goes from EUR 470 million-EUR 525 million. That should be. It's all in, including all the other activities and also your salary, Mr. Pöllinger. This is.
Currently there are no more questions online, okay? Of course, the audience.
Thank you. Hopefully, this will be with my final question. Mr. Andreas Helber, I saw that obviously the WACC in the segments has increased from 2022 when compared to 2021 for the obvious reasons, yields increasing and interest rates increasing, not yields. If we would to extrapolate that in 2023, given the current, let's say, developments in regards to interest yields, would I be wrong to assume that perhaps not only global produce, but also agricultural, sorry, agricultural trade and services, and maybe also Cefetra would revert back to creating an economic loss?
I see your point. The danger is there, of course, when interest rates are increasing further, that would have an impact on the WACCs that we use, being the WACCs are calculated. Like, who's, Mr. Seifert, who's calculating the WACCs? Is it PwC or is it KPMG doing this process for us? This is also what we expect. That should be reflected by a lower inventory again. The capital injected in there, the capital employed, must reduce.
Yeah.
Yeah.
On the other side, also, you expect the earnings of those respective segments to decline, partly quite dramatically in 2022. My question would be structurally, is agri trade and services and Cefetra slated to create a sustainable economic profit also in the future? W ill this be more or less be zero, given the current interest yield environment and let's say, capital requirements, profitabilities, extrapolated in the future?
I would say a clear yes when it comes to Cefetra.
I think their strategy is clearly defined on increasing the specialty businesses, lower volumes, lower capital requirements and higher margins. I'm not doubting on Cefetra. Within the domestic agri business, we have this structural, wouldn't say problem, but issue that we have to reduce the capital employed in there because the earnings are there where they are. This might, this is a structural challenge for the team. This is the, I think, Marlen, where we are, Marcus Pöllinger, strongly working on the, in the next couple of years.
Yeah.
Yeah.
Maybe perhaps a last one on the divestiture of the solar trading business. Given that your partner holds roughly 50% of the franchise, would your partner be prepared to reinvest its, let's say, divestment gain into the franchise? Would they pull that money out of this? Because as we discussed just before, the build-out of the IPP business is capital intense, but most of that will be or is slated to be financed via non-recourse debt and not via equity.
Very clear answer on this one. The proceeds from the sale will stick with BayWa r.e. There's no plan to distribute it to the shareholders. Maybe we will distribute a part of it because of putting it into our statutory account. Of course, we would ask for reinvestment. Both partner have the same view on it. This is nothing that we want to distribute to our shareholders, not to them and not to ours and not to their shareholders.
Okay. Okay, thank you.
One further online questions, a follow-up from Axel Herlinghaus, DZ Bank. Is there a special positive effect in the renewable energy business you expect from the Inflation Reduction Act in the USA?
This Inflation Reduction Act is very interesting. It's not really a subsidy, where everyone gets money as it is usual and normal here in Europe and in Germany. It's more a tax credit, innovation and initiation process or law. In so far, it could have a positive impact on renewable energy. What we observe at this point in time, for instance, is that European, without naming anyone now, but European, let me say, international solar panel manufacturer are investing in the U.S. In other words, they plan plants to produce locally solar modules for the plants we are projecting and building them in the U.S. This could have a very positive impact because what's the intention of the so-called Inflation Reduction Act? It's not about inflation.
It's about innovation and starting new businesses in the U.S. and to create jobs, especially in the manufacturing sector and here in the renewable, in the e-mobile, e-fuel, EEE sectors. I believe this will be a great success for the American economy, because the wind and the solar facilities we built over the years were always closely linked to tax credits, either for the investment, the Investment Tax Credit, or the Production Tax Credit. It's more a motivation for entrepreneurs to do something over there. Personally, I believe this will have a positive impact.
If the Inflation Reduction Act will be expanded in a sense that you can't use any more, let me say, Chinese as, for instance, solar panels, or you are not allowed to use European or Indonesian or whatever from Vietnam, these kind of devices. If this is the case, then the Americans are creating a problem themselves because then they will not achieve the CO2 reduction goals just in the United States. So far, I'm more positive than negative, but the situation is still unclear. Without the Chinese, by the way, it's very complicated. The special takes on Chinese products, especially Chinese solar modules at this point in time, if I remember correctly, 75%, which is really a lot.
Thank you. Dr. Hinkel, you have a follow-up question.
Yeah, thanks a lot. A final question on the much beloved, other segment. You said, you have special effects in 2022, and, next year also some special.
We always have special effects.
Yeah, that's the question. Is it the new cruising altitude, so minus EUR 100 million for the others also, beyond 2023? What's your thinking?
No, the cruising altitude until 2025, I have it all here in my black book. Mr. Oliver Schwarz would love to have this black book. It's 85.
85
85. This is what we have.
Growing with inflation, I guess so.
Sorry?
Growing with inflation going forward then, or, beyond that, growing with inflation?
No, it depends on how. I don't get the question. What was it?
Well, you said, okay, it will be 85. That's a new.
That's right.
Growing with inflation.
I think there's an impact of the measurements that we are currently having in of roughly EUR 20 million. I guess the EUR 80 million-EUR 85 million, this is the range of what we should expect.
Okay.
There are no further online questions.