Good day, ladies and gentlemen, and welcome to the Beiwa Analyst Conference Call Q1 2021. Today's conference is being recorded. And at this time, I would like to hand it over to Mr. Josko Raveldze. Please go ahead.
Good morning, everybody, and welcome to Baeva's conference call on the results of the Q1 2021. As usual, Professor Lutz, our CEO and Andreas Helder, our CFO will guide you through the presentation that we sent out this morning. In case you miss any kind of documents, you know that you can download it from our website. Ladies and gentlemen, The question for those of you who cover us for a long time know that we do not put too much attention on the Q1. Any kind of forecast based on the Q1 is difficult and this applies also for this quarter.
However, It's a great start and all about the Q1 we'll tell you now. Professor. Look, Good morning, ladies and gentlemen. Of course, it's not usual as Yoshiko said that I am with Q1 conference, because normally I'm not really interested in the figures of the Q1 as Most of you know, but if the figures are positive then that's the owner of the KJL CEO to make all these announcements and to explain. The business development to you and so far That's unusual, Josko.
Okay. Okay. So we start with an overall picture. Ladies and gentlemen, we are happy to present to you the Q1 2021 and the headline is exceptional figures for the Q1. So that's the continuation of the last quarter in 2020 And with a great performance even taking out the positive results of renewable energy, we would be On EBIT level still positive, which is really unusual.
So far, normally, we have a loss situation in the Q1 of €25,000,000 to €45,000,000 something like that. And this is wouldn't be a figure and result which is Critical or is seen critical within the Bayer Group and especially from the Executive Board. But in this situation, I think we need to explain why it is so good. That's the other way around. Turning to page You see the revenue increased 10.4 percent up to €4,200,000,000 And more importantly, The key message for the profit is from minus €28,000,000 to €45,000,000 in the first quarter Really unusual.
What is the reason for that?
We have in all 3 big operating
segments increasing revenues and earnings. Very important that due to some postponing effect from Q4 2020, we have the first Sales of some wind and solar power supplies in Q1 from Baibara EE AG. And also we have a higher increase for the investments in the agriculture sector in here especially the Machinery Business. And we have still a sustainable construction boom For building materials, but also for our project development in the building sector. Very important, of course, Is that we had the closing in the Q1 for Fywa RE's equity increase.
So our CFO, Andreas Selber was very happy To announce the €530,000,000 on our bank account. And so far, we accomplished all goals. And Baibarsi has been transformed meanwhile into a German AG. So we are a stock corporation under German law. Turning page Sure.
If I actually see here the comparison over the last few years regarding the Q1 results, so this is really exceptional. And we come immediately to page 7, the energy market development. So there is no change to the figures We explained to you after our annual report conference a few weeks ago. So it's still all Without any disruption also, we have in the renewable energy sector an expected Growth of 171 Solar Gigawatts and 75 Onshore Wind Facilities. So Taking in consideration that we have roundabout 16.5 or 4 whatever options, Gigawatt options in our portfolio.
So we are absolutely in line with the market development and the growth rate is still Intact. So the conventional energy last year, we had really great performance due to the crash of the Pricing for the barrels and a little bit postponed an increase over the last months in the Heating oil pricing, so it's still a very good performance. You will see that in a moment. Turning to page 8, you see Renewable Energy increase of revenue EUR 662,000,000 EUR 63,700,000 EBIT due to the sale Of 2 Solar 1 Solar Park in Japan, Isohara 35 Megawatt and Plei D Our France in France wind farm facility with 11 megawatts, but more importantly now for the Q3 Q1 result It is our trading activity. We have an increase of 31.3% of the trading volume for FPV modules and converters plus 23%.
Turning page 9. The conventional energy sector It's a little bit lower as last year, but this is not a surprise. Why? Because the tanks are full. Heating oil is down 46.4%, but that's not really a significant figure now for the outlook in 2021.
Also we have a decline in the fuels, but the increase in the wood pellets, which is very nice. And the lubricants We are back on track so far because we have an increase of 9.9%. We come to the Adi business just few sentences regarding the market development. First of all, we have a positive development also for The pharmatraders and supply chain managers in the commodity business over the last months. Last year was an excellent year already And the same in the Q1.
And our I'm coming back to the strategy, but you see on the left side The price development on the right side, which is pretty interesting, the global grain balance with our price as always. And we have to acknowledge that China is buying all the storage as far as possible the storage for grain Just to make sure that the food supply security in China is granted and this could have an impact on the pricing for 'twenty one. Turning to page 12. Here you see the super cycles, which we are talking about for many years in the market outlook for the commodity business Maybe is a little bit different to be observed in the future because of some external Implications for the market development in the commodity business and the key message is that Sustainability, the stronger demand for biofuels and the protectionism, which is increasing all over the world more or less Has of course an impact on the super cycles. So we expect from a market point of view volatility on the one hand.
On the other hand, The formula to say that the productivity increase in the agri business is roundabout 1%. The increase of the demand is a little bit higher. So you have the gap. This gap is increasing. And so far, you have constantly increased commodity prices in the future.
I'm not anymore aligned to the statement, which I made 10 years ago. So you have to change your opinion and your statement if you have more Interesting facts and knowledge about it. And so far volatility is much more important in the future, we believe, as it was In the forecasts of the last years. Turning to page 13. The import resources were in a much better shape from a market point of view.
The Agri equipment, especially in Germany is still intact. Very interesting that in Germany, the tractor registrations for new tractors Increased in the Q1 nearly 14% and the Global Produce Business New Zealand production It's 5% below the previous year due to the hail damage and some labor shortage because the harvest workers from the Pacific Islands are not So allowed to come to New Zealand. Nevertheless, we expect a good year. And in Germany, we have a good harvest. We had a good or we had a good harvest.
We have high volumes and nice price development due to the price increase for the pharmasthe The traders because the demand is extremely high and also for international fruits, for tropical fruits, TFC, our company in the Netherlands, the demand is extremely high in the retailers business It's in excellent shape. Coming to page 14, you'll see the Sefitra Group formerly known as VAST. The revenue and the EBIT increased In comparison to the previous year, the reason for that is not only the commodity trading, but especially our specialty A strategy. Many of you know that a few years ago we changed our strategy. We reduced the commodity volumes due to the volatility and the Risk combined with that.
And we invested in a lot of small and medium companies in U. K, in the Netherlands Regarding specialty business, which are niche products like vitamins, minerals and so forth for the compound food feed production Like premium crops in the UK or oil ingredients in the Netherlands and Placomax and other companies. And you see here an increase Up to €11,000,000 in the EBIT on the EBIT level, which is the evidence for our strategy. Turning page 15. This is very promising because last year alone in Germany as you know we made a loss of roundabout €24,000,000 The overall picture was not very pleasant.
Here we have a turnaround. Whether it's sustainable, I can't say at this point in time, Plus EUR14,700,000 in the agri segment. Agri means Germany, Austria and our Eastern European Participation in companies, we have more or less a slight increase on The revenue side and from €3,100,000 to €14,700,000 EBIT. And the reason for that is that we have some Interesting development on the fertilizer side. The volume increased, but the pricing created some positive benefits So for the bottom line, the volume in the seed side is growing as well and the foodstuff As well.
So in comparison to the last years, it's not only in 2020, the import business is much better. And so far, It's an interesting development. And the agri commodity trading and the supply chain management, it has nothing to do with Cepeda. That's a Separate not only legal entity, but a separate business model due to the positive figures in the open book we had in 2020, Which was now a part of it realized in the Q1 in our P and L statement shows that 1st of all, the market development is better than we thought it will be. And the second point is that the restructuring and reorganization activities The actions we have taken, especially in Eastern Germany and some Eastern European countries show meanwhile Positive result.
Turning to page 16. You'll see the Agri Equipment business, our machinery business more or less Flat revenue and an increase on the EBIT side, which is really unusual in former times. The Q1 was always very negative. The reason for that is a boost in the service business. So it's again the proof of concept for our services.
We invested a lot of money in high-tech Besides for the service and maintenance in Germany especially And we changed the skill profile of our people. And so far I'm very Pleased with this strong development on the service level. Then the consolidation Shows that the figures in the stable technology and bigger machines and so forth, this Trent is also on track. And so far, I'm very happy with the €4,500,000 and the outlook is also very good. We come to the Gerber Proteus business more or less on the same level as last year EUR 100,000 difference.
And well important is that we started our operational business again in the United Emirates together with the Al Dafoe Group, our joint venture partner. After the damage we had to suffer with the big flood then our Tropical Food Company in the Netherlands started a so called soft ripe chambers, which is very important for the To prepare the ready to eat process in a more softer way as we did in the past. And this That means that the products are more expensive and the customers are willing to pay for that. So it's a great success Within the European retailers. And we will see what the impact will be in New Zealand due to the hail damage And the shortage of harvest workers.
I believe that at the end of the day, the cost structure is much lower than last year. Volumes are lower. At bottom line, we will not have some damage here. So we come to the Building Materials sector. You see on Page 19, It's the same as a few weeks ago and no change.
We have a boom situation in Germany and in Austria. And so far, I'm very happy With the development the market development for wood for insulating material and the reinforcing Steel, the problem is only that on the wood side the timber is from a resources Point of view at this point in time very short because the United States and China they are Buying more or less all over the world wood and timber and this could have an impact on our business development, but we do not expect Significant downturn here. Page 20, 11.8% plus on the revenue side, The minus €5,700,000,000 is an excellent start in 2021. For building material, normally we have here a loss of, let's €75,000,000 to €30,000,000 alone in the Building Materials sector. Also positive is the contribution from our project business.
You know that we started 2 years or 3 years ago with the project development for apartments here in the southern part of Germany. And this is going to be one of the key business pillars for building material in the building sector in the future. And so far I'm very happy Turning to page 21. As always, our investments in innovation and digitalization, it's FarmVects also Included our application software IT company for the farmers, especially where we are market leader in But also the internal investments for the digitalization and e procurement process. So this is Well, it's a loss situation, but we have to do that.
And we are going to invest now €100,000,000 to €150,000,000 over the next years in the new software System the backbone of fiber for the business. So we the likelihood is Very high that we move from R3 to SAP HANA. So that's the overview of the Business Development and the different business pillars. Bottom line excellent performance. I'm very happy with the figures for Q1.
And now Andreas will show you a little bit more details regarding the figures and P and L and balance sheet and so 12.
So thanks. Andreas? Yes. Good morning, James. And also from my side, yes, I'll keep it rather short.
I think it's Only a few comments on the financials. The most exceptional things that Strauss points already are the Performance in the Q1 is sensational start. Just follow me on Page 23, a view on the other activities. You notice our cost Part within the disclosures that we make, you see an improvement from minus 18 to minus 14 Regarding the Q1, this comes now through the corona effects. Last year in Q1, we had no corona effect Incorporated in this Q1 number, this year we have of course lower OpEx mainly lower OpEx travel Pences, whatever marketing expenses, whatever name it.
So that brought it down to 14, This is in line with the whole year perception that we made of some 55, 56 compared to the full year number of 17 that we had In the full year period last year remember that we had the corona costs, the direct related corona costs and the missing bank dividends. This has not been affected now in the Q1. That will come only in the coming quarters. We expect dividends being paid from the banks in Austria As well as the ZetBank here in Germany that will be reflected in the upcoming quarters partly already in the second quarter. On page 24 to 26, you see the summaries of the individual segments that Kras reported about.
And I think it's very unusual that we already have the positive start Claus and Claus mentioned that if we already also reduce I'll take out the Renewable Energy performance. All other segments contributed to a positive result. And in my Nearly 100 years of career was in Baibars. I just saw it one time. I can't remember only one time that we had a positive first quarter that was 2017 and that was only driven by RE.
So this is quite an unusual state. And keep it in mind, If we look next year on the Q1 numbers, it could be the other way around again. But this year, it's a very exceptional start in all three segments. I just want to put a flashlight on the group balance on the group financials with the income statement. I think nothing worse to be mentioned.
In fact, it's on page 27 that the EBITDA is up. All the key performance indicators are up. And we have already within the Q1 positive earnings per share due to the good contribution of the mother Company's part, but well keep in mind what we stated about the performance in the Q1. Page 28 and this is reflecting What we also mentioned the increase of the equity, the increase of the capital share as well as reduction of the debt position. The debt position year on year, if you compare it to last year's March number nearly €600,000,000 down compared to the year end another €200,000,000 down.
Also in fact we had the seasonal effect of the increasing performance of the increase in operational business In the Q1, which is also reflected in the increase of total assets mainly driven and I could say Only driven by the increase in the receivables portion due to a higher Quarter end accounting sales have been brought in. So that brought up the number of receivables, which will already be reduced In the next quarters, the equity ratio up to nearly 20%. So everything is in line. Cash is in. The RE capital increase has been through.
The Q1 performance excellence. I think this is a solid basis For the upcoming quarters. And that should be it. I'll return it to Claus now for the operational outlook for the full year. Okay.
Thanks, Andreas. We don't give you a concrete guidance as always
and we will not change it as long as I'm in this position here. Nevertheless, I tried to describe what we expect. Last year, we had what was the positive result? 2.15. 2.15.
So okay, good. We expect in the Energy sector again an extreme positive development due to the pipeline we are Sailing in 2021 and also start as you know the LPP business. The plan is 1.1 gigawatts in 2021. Last year, we sold 600 something. So we didn't achieve the volume goal, but we overachieved we exceeded the bottom line result in 2020.
We did that over the last years maybe in this year. It's a similar situation. Commercial Energy, I expect a little decline downturn Due to the heating oil sale volume and the fuels, we have some positive impacts From our new Mobility Solution business, but it's still a little small plant. The agri business, The C. F.
E. T. Group is in excellent shape. We expect significant contribution from our specialty business, as I said. Global produce, I think we will have a similar outcome as we had in 20 2020, so it was €40,000,000 as you know.
So we have maybe a positive So a stimulus from the integration and the PMI of FreshMEX and our partnership With Carsule in the berry business, which is going to be very important. It's one of our new strategic pillars. Then we See our greenhouse performance in our line, which is fully operational now and we anticipate around about 4 harvests In 2021 with tomato for the local markets, local for local that's the headline. The normal what is normal? The agriculture business in Germany, Austria and so forth.
We Still in the restructuring process, the cost cutting is not yet over. It will take another 2 years as you know, As I announced during the last conference, so whether we can keep this level, which we So now in the Q1, I'm not quite sure. It can come to a downturn. Again, it has a little bit to do with the volatility also in the input Business. So the fertilizer start was excellent.
Now we are looking forward to see a similar development in the crop protection, but we don't know Whether it is as we assume that is a little question mark. Agri Equipment, Our order intake is higher than last year. So I think we will make it and the so called farmers 1,000,000,000,000 bahannenadiade The investment program of the government is a positive effect for our business as well. Building material, we have still the boom. So again, Excellent.
We are both in line. I think if we exceed a little bit the performance of 2020, we can be happy. Thank you very much. And we are happy to take your questions if you have some. Yes.
Thank you, Professor Lutz. Thank you, Mr. Helber. I recognize that some of you already wrote the report, but nevertheless, if you still have some questions, feel free to ask now.
Thank
one. And we'll take our first question from Oliver Schauer in Albert Research, please go ahead.
Good morning, gentlemen. Otero Basar speaking. As usual a couple of questions from my side. Firstly, congratulations on the really outstanding results in Q1. However, some questions remain regarding firstly, the inputs, so basically Fertilizer, Pesticides and so on.
I guess part of the increase in profitability there was not only increase in demand, But also the underlying price increases. So you basically had some inventories and sold them off to the farmers. The costs of building up those inventories were much lower than the costs That the farmers encouraged due to the price increases in the meanwhile. Is that something that you expect To continue, so basically are you banking on an ongoing increase in input costs? So will that From your perspective at least development comes to a standstill later in the year so that this let's call the windfall profits From the lower Price of acquisitions to the selling costs might shrink?
That would be my first question. And adjacent to that, Do you still have significant inventories in those inputs at the moment? 2nd question would be in rather to Increase in shipping rates. Does that affect your business? And are you able to pass on those increase in costs To your customers.
And my last question for the time being would be Solar trading. Mr. Lutz, you alluded to a significant increase in volumes in Q1 in regards To solar panels, solar cells and converters. I guess part of that is pre buying due to Coming price increases, if I read tables correctly in regards to solar modules prices, Prices have on the verge of going up quite substantially. I think at least part of your customer base is in the know Of this development, so will we see this development continuing in the next Quarters from your perspective?
Or are those pre buying effects basically limited to the Q1? That would be my Thank you.
Mr. Raskels, good morning. Last question to Hans. So La Amodus the volume is extremely high, but we have this A trend over the last, let me say, 2 years. And so far, also due to our market position in Europe, we are number 1.
The module trading business, let me say that's for us a normal development. We do not see that it has a direct link to the Price development because sustainability, climate protection and all these things are for the residential, Especially in this type of business model is residential oriented. We expect that this trend is to be continued in 2021. Then coming to the fertilizer business, you're right. That's a windfall profit because our stock inventory It has been purchased in autumn 2020.
And so far over the last months In the Q1 2021, we sold our stock inventory. And due to the increased pricing for the fertilizers, we had some windfall Profits, but it is not really significant. It's not so that the €40,000,000 which we show now the profit is based is just alone based on the windfall Profits for the fertilizers, yes. You could also say from a management point of view, it's an excellent managerial performance because we knew in 2020 that this is a low price and we sell it for
a higher price in
2021. No, that's not really true. A little speculative of course. Then your question was number I guess the Crop Protection inventory is high. Andreas what do we expect here?
I don't know. I don't have Figures in
mind. No, no. From the windfall profit that we saw or small windfall profit that was coming From the fertilizer. And if you go back, Mr. Schwartz, on slide 13, there you see the price curve that Claus discussed.
It's different from what we saw last year. Last year in October 2019 was high level with low prices in the season. It was low prices in the Aylaadron season and now we have higher prices in the technical season. So that gave the windfall profits. For Crop protection is just starting now.
The weather conditions are pretty good. It's raining right now. This is very important for the Crop protection season. And finally, on an effect should be expected or could be expected from What we discussed at year end on the commodities the product that we have stored From the last year's harvest, which are in the marketing process now, there we expect the positive impact in the Q2.
Yes. And in the high volume as last Yes. It's not the price driven and the same with the fertilizer. It's not only price driven, it's also volume driven, if I have it correctly By heart, I think we sold 30,000 tonnes on top in comparison to 2020. Yes.
Was there there was another question, What will be the shipping rates? The shipping rates we have contracts and contracts we have stable prices and so far we will not be negatively impacted.
Thank you. Very clear.
Thank you. Our next question is from Ann Margarazn Crowe from Edison.
Good morning, gentlemen, and congratulations on a really great start To the year. I hope it continues. Thank you. I have two questions. Thank you.
I have two questions regarding the Renewable Energy segment. The first Is this it's very early days yet for the relationship with Energy Infrastructure Partners. But can you give any insights into how that is progressing and whether that is helping you to accelerate The project pipeline. And the second one is, are you seeing any demand For installations with energy storage as well.
Okay. 2nd question, Andreas, think about it. I'll start with the first one. So how is the impact of EIP from Switzerland? So As you might know, in the beginning, we also had Credit Suisse subsidiary with 70% participation of CS and 30% The management now is exactly the other way around.
The management took 70%, 30% off with Credit Suisse in Zurich. The key aspect of this transaction was the capital increase we accomplished a few weeks ago finally In the closing process, so the €530,000,000 plus some commitments of the 2 shareholders That we are going to increase the equity in the future as well if it's necessary to finance New projects and also to have, let me say, the right equity basis for such big projects, We are doing together with our partner is to increase expand our IPP business. So we take more and more Wind and solar power facilities on the balance sheet have a sustainable cash flow and also a sustainable Profit development, which is easier to forecast than to start again and again and again new projects and that's the big difference to To the past. And well, let me how is the cooperation? Well, we have now by the REAG with an Executive Board, so that's a corporation under the German law.
We have a Supervisory Board with 6 members, 2 independent directors From the business, but not directly linked to Baiva or EIP, Andreas is Our CFO, member of the Board and myself, I'm the Chairman and Mr. Durek from EIP is the Vice Chairman. So the cooperation and the supervisory I support together with the executive board. Well, we are still in a let me say in the beginning of this relationship. But due to the fact that this transaction took so long, we know I think one another Pretty good meanwhile.
And the cooperation with Mr. Durek and his team in Zurich It's really excellent. And also personally very, very good and I can't complain about anything. So The psychological and the human basis for this corporation is very positive. The financial basis is excellent.
IPP that's new for us more or less. We created a new department Within the REAG to take care of the IBP, the head of this new business pillar Used to work already for many years in BioWare RE. And so far, there are Old phases with new jobs, so to say. And I'm very positive with the development. I think that's it's fair to say.
So that's the one question.
And the other one Andreas? Let's go on the storage business. To be honest, I can't give you a very substantial answer on that. What we discussed with the colleagues from RE for the Q1 and last year's performance was mainly on the trading business. It was on the developing business.
So that one's very good. On storage, it's not the main focus with our RE colleagues. But if you need more insight, we could come back on this to you. Yes. It's not the main focus on the activity that the colleagues run-in RE.
Generally,
so I mean the inverters are increasing the demand for inverters and solar modules. So I do Expect also an increase of the demand for storage systems, yes, because usually it just go In line and there is a correlation. But I will go back to our colleagues and give you a concrete answer on this.
That would be very kind. Thank you.
Okay. Anything else? Herskov, do we have another Questions or so.
And we'll take another question from Keith Hojman in Medtler.
Yes. Good morning. Thank you for taking my question. It's one very lean only. It's about the Pension provisions, rather housekeeping question.
With most other companies, I saw or we saw a quite Notable decline of these provisions because of the risen discount rate, I think In Germany from EUR 0.8 billion to EUR 1.2 billion. I think your provisions as far as I can see that Didn't decline. Can you explain that please?
Yes. I think this is a question for me Mr. Hyman. Very clear on this. Last year's discount rate was 0.66 in our VIBOR statements.
And we already announced at the year end that we expect a downturn on the provision. That means an increase in the discount rate, But we only account for this discount rate once a year. So this will not be reflected over the year because it goes up and down During the year and we just take it one time. So the provision might be down by some €40,000,000 Q1 ends to year end 2020. So this
is what we expected,
but We wait for the outcome on year end and do it not on a quarterly basis.
All right. Understood. Okay. Okay. Thank you.
So what our pension specialists discussed with us is an increase to from this 0.66 that I mentioned to 1.1 On our duration for the Q1.
Okay. All right. Thanks.
Thank you. Next question from Norbod Kariuba, Doctor. Kariuba Research.
Hello. Congrats to your very nice results. I have some questions for you. I find it very interesting this BYWA Mobility Service and Solutions, For example, the keywords of e mobility and your fueling cars. So which investments do you see in the future?
And can you give us a little bit insight in the numbers of members actually? And my other question would be, you mentioned a new software implementation and I heard the name SAP as for HANA, is it that you like to have similar systems? Or do you Refer on that system for is it mainly for optimizing the inventory for the Materials division or do you plan generally to implement software For more divisions. Yes. Thank you.
Okay. Thank you. Also thanks for your congratulations. The mobility company, Biomomobility Solution company has the following purpose. The first thing is that we are a consulting company or should be Developed over the next years more and more for companies, households and so forth how to Handle the e mobility challenge, so to say.
And it's a project development and a project consultancy That's one purpose. The other one is that we started to invest last year in LNG liquid natural gas fuel Stations all over Germany. I think we invested in 10 or 12 LNG stations. That's the second pillar.
Each one is €500,000,000 And
Each one is
€500,000 Each one is €500,000 so times €10,000,000 or 12, so €5,000,000 to €6,000,000 Did we invest already in the LNG business? Then the bivalve car, the fuel station cars is part of the mobility Business and well it's a small plant. We started 2 years ago, but it's already profitable I think €1,500,000 or €2,000,000 Which is of course not really significant for the overall picture. But what we need to have is and to do is a new strategy and That type of compensation business models because I expect a further downturn in the heating oil and the fuel, the classical fuel business. And also regarding the sustainability challenges, so we have to change That over the next years and I expect that a new either federal government or in the new deal in the green deal included from the European Union That heating oil systems will be forbidden in the future.
So and so far, we need to do something to compensate. And Of course, best solution would be to overcompensate this downturn. So that's LNG, that's PIVAKAR, That's a consultancy business. For instance, I'm a customer as well at home. In my farmhouse, they organized the Quick charger for my little PL500, my e car And stuff like that.
But also for companies, we develop and that's substantially developed the program and the project for e mobility. And coming to the software side, Andreas you wanted to mention something here?
Yes. With the change of the SAP program that you mentioned, this is a project that we just started. It's a change from SaaS, right? So S4HANA. This is nothing new.
We were already on SaaS, but it was a very complex SRP system that we run-in the past and determines now for the next it's a project over 5 years and it will be the volume invest volume I don't know of More than €100,000,000 I guess, so €20,000,000 each, but this is necessary to go into this change and we are in the phase of Defining or redefining the processes that we have put them in a more modern state of art and also Include the smart farming and smart approaches that we run throughout the business. So it's nothing new, but it's a very talented project that we run internally already.
Yes. Thank you so much. May I ask a very short final question? I mean, it's hard to predict, but give us some Words about CapEx in 2021 maybe please?
Yes. On the CapEx side, I think first what we have to define what is our CapEx. The CapEx is how I define it. It's Everything that we need to keep the business running. Nothing CapEx is not including new investments in my definition.
That's sometimes a little bit Unclear in the discussions with whom I discussed with. But just to make it clear, it's just the CapEx that we need to keep the business running To improve the business, but not for new businesses. And therefore, we always state in a number of something between €100,000,000 125,000,000 €150,000,000 So in this range CapEx is expected. I do not expect an impact from a negative impact or a downturn impact from corona In 2021, so everything is back on track again. So let's talk about the number of EUR 100,000,000 EUR 125,000,000.
Okay. This is very fine. Thank you so much. Thank you. Welcome.
Maybe A question from Norde. Apologies.
Hello? Hello. Is the line open? Yes.
We'll take one
question from Bruno Guintol
in Pareto Securities. Good morning.
Thank you very much for taking my three questions. Congrats on the good numbers in Q1. First question would be on Equity Trade and Service. On the turnaround you're seeing here, I would be interested how much of this Can we attribute it to cost savings from the restructuring program? And how much of this was underlying business?
That would be my first question. 2nd question, you alluded to the volatility of grain prices. And if I look at slide 11, I think it was, I see a very steady development regarding corn. But regarding wheat that is actually very volatile. So please could you explain us That I'm not so familiar with markets what is behind that discrepancy.
And thirdly, I have to try it. I probably won't say a lot of on this. But regarding your guidance, so at the End of last year or during the presentation of 2020 numbers you said you expect A slight increase of EBIT in the coming year. Given the Q1 numbers, we in order to achieve only a slight increase of EBIT, We must see a significant drop of earnings for the remainder of the year. So my question would be, do you see any risk that is Actually going to happen or what's behind your cautiousness at this point in time?
Thanks very much.
Okay. Thanks for the question. Let's start with the first question. So the cost cutting program in the RB business for Germany It's not completely realized in the P and L statement yet. It's a small amount of money Because the full impact we will see over the next quarters.
And To be honest, I can't tell you from the 14 point something million what is really due to the cost cutting program. But we HR cuts and infrastructure reorganization, this takes time and it costs money as well. So I think the full year impact we will see a little bit later Andreas. Is this correct? Yes.
I think the Improvement of the result could be very clear on this is operational. It's improvement of the performance of the it's more the performance less The cost savings so far for the Q1. Okay.
Then the last question regarding The guidance or guideline for 2021, whether we expect some significant downturn. Just take The volatility of the project business. For instance, if we had realized the 2 wind and solar projects Japan and in France in the last quarter 2020, you wouldn't see it here. So in other words, it has nothing to do with a downturn. It's just what can we finalize, what can we sell and what can we report in our P and L statement.
And so far that's I would say it's a natural volatility. Without these profits from RE, for instance, we would be Still positive, but on a very low level, which is much better than usual, but it's not such a big jump. Here you see an improve Of operational performance of roundabout €73,000,000 or €74,000,000 in comparison to the previous year. So due to the volatility, It can be that at the end of the year for instance we have to postpone some projects because we don't have the connection to the net. We are not Through all these administration processes or whatever.
So it can always happen that we have a postponing impact on our balance sheet. So a real downturn in the other businesses, we do not expect in 2021. I think it's stable. Just look to Our commodity trading in Rotterdamn, it sounds stable due to the specialty business. Well, I don't expect a downturn here.
The machinery business as
I said,
we Our order intake is extremely high, so the books are full. Maybe we have a little postponing due to the Chip crisis because for instance hence the production and manufacturing here in Bavaria I had to stop over 1 week because they were not able to embed the chips or the chips were not available for the manufacturing process. Heating oil, well, I see a downturn in comparison to last year and the building material is stable and global produce is stable as well. So This is inherent so to say volatility over 1 fiscal year. And that's also the risk we have right now Due to the excellent performance in the 1st 3 months that people take the calculator and make a simple calculation times war Plus the uplift you have always in the last quarter and then you don't have 20, 15 plus xyz1000000, But you have suddenly €300,000,000 real EBIT.
And this is due to the business model and models we have and the complexity of fiber. This is not a fair process, I would say, okay? So and the second what was the second question with the commodity prices?
Doctor. Henkel, could you repeat
the second question regarding I think commodity and wheat that was not really a part.
Yes, of course. You sold the price development in wheat and in corn. And in corn, it appears very stable and very continuous. While there was Underlying volatility and the question for me is why is that the case? So why is that so different?
And it was slide 11.
Yes. This down graph among wheat and corn is stable. So first of all, the parameters are very complicated. It's more 24, 35 parameters who are creating then the price development in the commodity business. And one key element is always the financial institutions investing in commodities, Speed trader, algorithm trader and all that stuff and they can change more or less overnight the pricing.
So a real serious forecast For the pricing is not possible. That's what I learned over the last 13 years. Nevertheless, fundamentally, We should have stable price development due to the demand consumption and The growing volumes and the storage. But and that's over the last weeks or let me say in the Q1 That we had to acknowledge that China especially is buying the volumes For grain more or less all over the world to make sure that the food security Will be stable for China. And there's one key element.
China is always the unknown Participant in this market development. So this is very, very complicated. And protectionism, climate development, the water supply, Currency issues, political turmoil and stuff like that are all parameters Which are influencing the pricing in the commodities. Well, I don't know whether this answer is helping you, but it's so unclear. It's like a black box, yes?
And Claus, it might also be a timing issue, because wheat is the leading currency as we say in the on the commodity also volume wise, So by far the highest volume. So they are running up and the others are running after them. Maybe it's just a timing issue. There's nothing fundamental that These movements of volatility are in such a discrepancy as it is shown here on the slide. And if If I may just to add one comment on the outlook and the expectation.
I think one thing should become very clear that we are not expecting Fundamental downturn to come in the operational segments, but those who are running with 5 or 4 a couple of years know That from the seasonality of our business, we always have the good old days to Points in the year where we reflected the business that was the end of May and was the end of October. So that reflects the seasonality that we have in the business. So once again, we did not change Any forecasts or things like that due to the Q1 performance, it's a good and solid start For the year, it's not that we expect bad things to come or we had a lot of postponing effects in the Q1 Seeing that might affect the other quarters, but it's rather too early to give a serious forecast situation, forecast outcome From the Q1 performance.
Okay. Thank you very much.
Anything else?
Would you like to take another question? We'll take our next question from Sven Sauer, Kepler Cheuvreux.
Hello, gentlemen. Also from my side, congratulations on the results. I have a few questions. First is on the agricultural equipment Business Unit, was the business and the performance with the new machinery in line with your expectations And also in line with the new registrations that we saw in Germany. The second and third question Regarding the global produce business, on your slide on slide 17, You state that you saw some logistical challenges in North America and Australia.
Are you referring here to the container issues that we saw? And the third question on the global produce is regarding on the Aldara business. Is this A significant part of the global produce business? And is it a higher or lower margin business than the rest? And my final question is regarding the Renewable Energy business.
Could the newly announced climate goals From the federal government in Germany trigger any changes to your medium or long term planning?
To answer the last question, concrete is, we don't expect a change in the business development And the budgets we agreed upon till 2018 together with the EIP because there's a lot of political Around and Germany is one market, but not a key market at this point in time for us. It's more the United States, Australia, And then some other Asian countries. So that's interesting what Mr. Scholl said this morning. Well, I don't expect, let me say here, a significant push forward.
Downturn, not at all, but Not a real push forward because the problems you have here building wind and solar facilities As a power supply station like Sevilla for instance or our Corazon farm in the United States with 170 megawatts to 200 megawatts where you can provide, let me say, midtown With energy or something like that, this is not easy to realize in Germany due to the opposition you normally create In the village and the cities and in the little towns from the population they expect a change in energy, but they do not want to be Confronted with windmills and stuff like that. So it's a little bit hypocratic as always. And so far no change. Stan, coming to the first question the tractors or the machinery business. We are not really in line with the market increase in the Q1.
That's right. Nevertheless, the registration of the machines in the Q1, which is the increase in the market overall market development Was on the basis of the purchases in 2020 between Christmas and New Year normally. And so far this is it's a nice figure, but it's not really reflecting the operational market. Personally, I'm surprised that our order intake book is full and that we had a higher volume As last year, which I did not expect, I thought that we will have a calm and cooling down period now the machinery business, but at this point in time, it's not yet the case. And so far, I'm very pleased and very happy For this development.
And regarding Global Produce, Andreas?
Yes. On the Global Produce, your question related to the logistic challenges in North America and Australia. I guess it has less to do with shipments or with container freights. This has more to do with retail logistics. Demand The lower demand from the retailers in Australia, some of the tomato business and similar in North America.
Nothing. The shipment is just starting now. The new harvest is just now getting on its way to Europe and Asia. And the last question related to Al Daghra. The Al Daghra Contribution in the Q1 was contribution of positive €2,500,000 Overall, on the whole year contribution, it might be seen by 5% of the total outcome should come out of Aldagha so far.
Thank you very
much.
We'll take another question from Michael Schafer in Commerzbank.
Yes. Thanks for taking my two questions. Basically, Quickly ones. On after we have seen the new fertilizer regulation being implemented since 1st May last year, This is now the 1st fertilizer season under the new rules, so to say. And I wonder, you show some 0.8% fertilizer volume growth So on one of your slides basically.
I wonder whether you can shed some more light on how this is perceived in reality basically and whether you see Curtailed demand coming from this regulation. So this would be my first question. And the second one is sticking to the ex slide on page 15 basically. You're reporting seat growth volume wise 27%, which looks like a quite high number. So can you just put into perspective What the business means for you?
Maybe what how this relates to the €1,000,000,000 of sales? And what's behind significant acceleration here in the Q1? Thank you.
The fertilizer business as you know is a very seasonal business. So Q1, if the weather conditions are fine as it is, Yes. And we are not we are full liner of course, but the key fertilizer product is Carcagamun Salpeta. And There is no significant change at
this point. But I guess from the outcome from the regulations, they expected a cut off from 25% overall in the business. Yes. It wasn't at this. And just reflecting the on the very early start now, we have an increase now
in the Q1, but this must be in seasonal effect. Overall, it will be reduced due to the regulation. Yes, absolutely. And we had a very nice weather in our core Area and so far that's a natural development. You can't calculate it up 12 months or so.
That's not possible. What is also happening, Michael Schuylkill, is that the area of cultivation is slightly increasing, yes, due to higher commodity Right. It seems that it's more interesting for the farmers to cultivate more. So for this reason, it's automatically they also have a higher demand for fertilizer.
And maybe if I may from the on the seed business just reflecting the importance of the seed business in the overall agriculture business. I think it is quite it's a low volume business, but it's a better profitability. If I consider the Seach activities in Buy by AG are very successful daughter here in the Uchfunding next to Munich And also the Austrian business. So profit wise, I would guess they would stably contribute something between €5,000,000 to €8,000,000 overall, if I take all these things together. So it's an important volume wise, but important stable profit contributor.
Maybe
just one remark for the fertilizer business on top. The regulation has Most of the regulation clauses have to do with the legal documentation process. And so far, by the way, we have a chance also with our application for the fertilizer business from Farmpex to support the farmers to Optimize the input so far. And this has not really an impact on the seasonality Of the fertilizer business. Nevertheless, looking more fundamentally to the input business in the future, we expect that over the next years, We will see a reduction significant reduction of the volumes, because we believe that in the Crop Protection business more and more products chemical products Will be forbidden due to the mood and atmosphere in the European Parliament and the Commission.
And that's a European It's a European task. And so far, there will be a reduction. But also in the past, facing reductions in volumes Normally as a consequence that either the chemistry or other let's just say organic Companies and startups, which are very becoming more and more important in our are compensating the volumes And the businesses because we have new products on the soil at the end of the day. The farmer needs fertilizer. The farmer needs Crop protection products otherwise the volumes can't be granted.
And then the food supply security and the prices will not be Protected. And I tell you what's going to happen, especially in Germany, if you have suddenly a 30% to 40% increase For food prices and this is going to increase then political pressure on the government. So that's a back and forth Game outcome is not really clear. But historically, you had always a compensation For the products which are not anymore allowed for the markets.
Thank you very much.
Very clear. What was the was there another question?
Mr. Schleifel, maybe just on the seat, the increase the 27% increase year on year. That was mainly driven I guess and that Jesco just said it on rape seed, which came in earlier or Last year it wasn't there and so that was mainly Red Sea. But if you take I just looked at the numbers the volumes that we have For example, Dunga, it's over 600,000 tonnes. If you take Dardskoot in total, it's 58 So it's just oneten of the volume, but a higher EBIT contribution.
And at rate seed, we have an increase as well? And Rezi, this is quite easy
to expand because the volume is high. So the farmer has planted more right As it was the previous year, so you have a shortage, prices go up and you have more acres Seeded with Rich. Big cycle. Yes, exactly. Yes.
It's a big cycle process, the normal one. And that's also the difficulty you have for a clear And honest forecast, I would say. It's really volatility is extreme in this business. That's the reason why we Just for the new guys listen to us, that's always very complicated or makes it very complicated to make Reasonable guidance. So that's the reason why we just described it and we don't put the figure on the table Because you have very quickly in a worst case scenario a downturn or sometimes you have an upside like in the Q1 now.
It's always not easy to explain internally. Okay. I think there are no more questions, isn't it? Thank
you. There are no more questions.
Okay. Thank you very much for your attention. And the next conference call takes place on 5th August. Until then, please Stay healthy and take care. Bye bye.
Thank you. And this will conclude today's conference.