Good morning everybody, welcome to BayWa's conference call on the results of the third quarter figures 2019. Next to me is sitting Professor Klaus Josef Lutz, our CEO, and Andreas Helber, our CFO, who will guide you through the presentation and take the question at the end of the presentation. All relevant documents have been sent out this morning. Otherwise, you know you can download it also from the investor relations website. I hand over now to Professor Lutz.
Good morning, everyone on the phone. Thanks for joining us for our analyst conference and the communication and key messages with regard to the third quarter 2019. The main messages and key messages first maybe. You can follow on page four of the presentation, revenues and earnings up year-on-year after the third quarter. Improved earnings in all three core business segments.
We confirm a significant increase for 2019 annual results. Looking to the slight increase on the revenue side, the 2.3%, this is caused by our conventional or classical energy business due to high volumes in the heating oil. We are also in a very good shape with regard to our fuel stations. The profit increase more than 100% from EUR 28.3 to EUR 77.3 million on EBIT level, has to do with a better performance of renewable energy, around about EUR 23 million.
Nevertheless, they just are on a break-even level, because we expect the revenue and of course, especially the project earnings in the last quarter and again, as last year, it's a similar situation in the last weeks, but we are not depending on one big project. We have several in the pipeline, which we are going to sell. Very good performance in the first nine months now, and you can compare the quarterly performance on page five with the last year's. Interesting, last year was a weak third quarter with -3.8%, now EUR 25 million. Q3 2017 was also not so good, but 2016 and 2015 the higher EBIT had to do with the sale of some renewable energy projects.
The comparison on page six and the development of the group and the comparison of EBIT over the last years, I would say we are better than the previous years because we do not have yet sold too many projects. Coming to the agriculture segment. On page eight, you have an overall of our agriculture market development on a global basis. The agri commodity prices are not very volatile at this point in time, which means that the sidewards movement does not really create upside opportunities for profits. We depend very much on the functional margin, with regard to our supply chain management, especially with fibre grass supply and trade. The world grain balance, not a significant change to our last analyst conference.
The production, the expected world grain harvest in 2019/2020, the season in which we are right now and the consumption are more or less in a parallel or a similar situation. In other words, we do not expect a higher volatility and especially not a real upside in the commodity prices over the next months. Coming to page nine, you see a decrease in the EBIT profit from EUR 23 to EUR 10.6 million and also decrease in the revenue. The reason for that is pretty simple. We are reducing the volumes traded in the commodity business due to the little opportunity to make profit, and the EUR 10.6 million are the result of our specialty strategy.
We acquired over the last year some new companies in niche markets, specialty markets like organic supply for the compound feed industry and so far our strategy to change the volume, very much volume-driven commodity trading activities and supply chain activities, more to specialty trading and specialty activities. This move was absolutely right. We are not at the end of the story here because we are in the process to acquire some further little companies, with regard to special products. Coming to page 10.
The overall market development and the input resources, this is very complicated, especially in Germany. It has to do with the image of the agriculture business, and also some regulation impacts from the European Union with regard to crop protection and to fertilizers. We are here in the local market in Germany and in Austria, a little bit under pressure.
The global produce business development this year is much better than last year. We have still some hurdles in the U.S. The harvest from Washington State, which is foreseen to be exported to China, will not be possible due to the trade war. The volume and the size of especially the apples from New Zealand was not very much in line with our expectation. We expect a very good harvest in Germany this year. At the end of the year, you will see that BayWa will show an excellent performance in the global produce business, coming to that a little bit later. Agriculture equipment, maybe some of you will be surprised that the new registrations of tractors in Germany are up of 15.5%. This is not the case in Eastern Germany and Northern Germany.
This has to do with the highly fragmented market in the southern part of Germany. The trend is still on track. Insofar, we expect also here a very good 2019. Not on the highest level we ever had, 2018, a little bit lower, but nevertheless, it will be a great performance. Coming to page 11. Here you see our agri trade and service business, which is the input business, the local origination, the supply chain management, and the trade of the key commodities in Germany and in Austria.
We are in a much better shape than last year. The revenue is up 5.2%, so EUR 2.7 billion and EUR 10.5 million EBIT. The increase in revenue is volume-driven, of course, and we had a better start in the sale and trading of our agri commodities in Germany in comparison to 2018. Coming to page 12.
Here you see a significant increase: the profit in our global produce business. Revenue is more or less flat. The profit is EUR 13.2 million. The reason for that is a much better operational business and some one-timers, especially the optimization of our portfolio in New Zealand, which is an amount of EUR 10 million round about. Al Dahra BayWa Agriculture LLC is in a good, more and more, let me say, in a good market position in the United Arab Emirates.
The supermarkets are demanding the premium tomatoes which we are producing. Next year, I guess, in the full swing of this business model, we are profitable. We come to page 13. The equipment business, as I said, it's still very positive. We are on the right path. Increase on revenue of 3.4% to EUR 1.2 billion and the profit EUR 14.5 million.
It's slightly lower year-to-year comparison due to some delay effects, especially in Eastern Germany. The order book is completely full. If our manufacturer, the CLAAS company, is able to deliver the tractors, harvesters, and other products, we are positive that we catch up a little bit. Interesting enough is also that we have a much greater demand from our non-agriculture customers, especially local authorities, cities, villages, and so forth, for tractors, especially small tractors, or the airports are asking more and more for tractors.
BayWa has a good market position in this segment. Page 14, that's the summary of the financial agriculture segment, the income statement, the P&L statement. Andreas is going to comment that a little bit later. Let's come to the energy segment. Excellent performance. Also, we did not yet sell most of our planned 660 MW in the renewable energy business.
Here you see on page 16 some information with regard to the market development. On the left side, no change. Solar is going to be more and more the most important pillar. Wind, of course, stable, also a + 14% on a year-to-year basis. A very important message with regard to the solar module trading and service business in Germany. Here we went through a very complicated and difficult period over the last years. Now we are back on track and very profitable. The conventional business is due to high volume and the very good business in the fuel station business is also excellently performing. Maybe a comment to our planned private placement with our BayWa r.e.
Of course, we are not in the position to go into details at this point in time, but I would like to share with you that we are on track with our plans. It's very interesting that the demand for participation in BayWa r.e., the 40+% as we told and communicated this information to the capital market. The demand is very high. A lot of companies, PEs, and interested parties are very enthusiastic about this approach from BayWa. I'm very, very much convinced that we are in the corridor which we communicated. As I said, we want to create another EUR 500 million from the capital markets, plus the Green Bond, which was positioned in the market very successfully with another EUR 500 million.
At the end of this year or maybe quarter one 2020, it depends a little bit on some approvals which we need, if we have a partner agreement signed with a third party. That means only for renewable energy, EUR 1 billion from the capital market. As I said, and I would like to repeat that there are a lot of interested parties to become a stakeholder and shareholder in BayWa r.e. At the end of the day, of course, we make the choice, and we are in the process internally to evaluate some indications and who is going to be the preferred partner for BayWa to become a shareholder in BayWa r.e. Okay. We come to the result and page 70. Well, I need not to comment it. It's too early.
It's interesting that we are a little bit better than last year, the key projects will be sold in Q4. As I said, the plan we have is to sell around about 660 MW in 2019 in comparison to 2018, 450 MW or 460 MW last year. If you turn to page 18, the energy segment, the conventional one, it's an excellent performance, more or less, a higher revenue due to the volumes and the profit, EUR 21.5 million.
Excellent performance. I explained why. We come to the financial statement. I do not want to comment on that right now. Andreas is coming back. Building Materials. Well, that's in Germany, going to be, I guess, a complicated sector because page 21, you see still some positive figures. The development is on track. Again, in comparison to the last years, it's very good performance.
Nevertheless, due to the political discussions with regard to rental fees in Berlin and some other main cities in Germany, it could create some uncertainty on the side of potential investors. At this point in time, we do not see any influence and impact on the P&L development and the order intake for BayWa.
Nevertheless, that's one threat which we are faced with and we have to deal with, and our answers are especially to invest more money in alternative specialties and also more and more in the online business. Page 22, you see the result. It's more or less on the same level as last year. Financial income statement, Andreas is coming back. Our business segment, and there will be a change in the future in the reporting, by the way. Innovation and Digitalization segment, which is especially smart farming, digital farming.
We have an investment of EUR 10.2 million the first nine months. We are expecting now a good performance on the AGRITECHNICA, where BayWa is going to present a new product portfolio of our applications in FarmFacts. The pre-orders are very good. There's no doubt about it that the digitalization process in Germany in the farmers business is not as fast as we and I expected. It has to do with the conservatism of our farmers, more importantly, the infrastructure is not in, let me say, in a state-of-the-art shape. That's really not only a pity, it's a disgrace for this country. We are working on the internationalization process for FarmFacts. In Germany, we are market leader, as you know. My goal, our goal, is to become market leader in Europe with our applications as well.
We start now with the Agri Application Group during the AGRITECHNICA. That is a communication software which is enabling the agri-devices and the machinery to communicate between all the different machines and so forth to share information, to transfer information. That is pretty new. We hope that this will become a standard for the farm industry in Europe.
Other activities that serve such a flashlight, -27 to -30 last year. That is the overhead. Well, I need not to explain that because the most important explanation will then come with the annual report in March 2020 because it is not yet clear what the outcome will be of some activities which we have in place. That is the overall. I would like to repeat now for the first nine months. We are in a very good shape the first nine months.
We are on track as planned. A little bit later I will make some comments on the outlook for 2019 and as far as it is possible also already for 2020. Andreas Helber will explain now the group financials.
Yes, Klaus. Thank you. Good morning to everybody also from my side. With respect on the P&L and the balance sheet on page 28 and 29, I will keep it rather short this morning because we are already running through the final quarter, and the final picture at the year-end will be completely different to what we see now at the current status. Nevertheless, we are, as Klaus said, good on track with respect to the segmental disclosures that we mentioned.
Just keep in mind that the improvement year-over-year is mainly driven through the energy performance, both in the classical and also the renewable energy business. Within the agriculture segment, we have a improvement on the global produce. The improvement within the German or the domestic market business is currently being set off by the lower volatility on the international trading.
Also we expect a catching up effect in both parts of the segment, the domestic market as well as the international trading now in the final quarter. We just got the news coming in that China and the U.S. now are back on track with their negotiations. That all will influence the business and creating most definitely a higher volatility in the business, though that could also be an improvement trigger for the final quarter. When it comes to the overall, to the summary on page 28, just a few comments on the whole income statement picture. Firstly, the comparison year-on-year is somewhat affected by the IFRS 16. You probably have seen it with all other companies in the portfolio you're looking at.
If you look on the EBITDA improvement, which is rather significant, it comes out of the operational performance improvement, of course, by some EUR 50 million to EUR 60 million. One effect is mainly due to the getting out of the depreciation effect being offset by the lease expense coming in and then an effect of net EUR 12 million, which is now shown in the interest down below the EBIT.
The EBITDA has improved the overall number. You see that when it comes to the EBITDA, the earnings before tax, which is only EUR 24 million higher than the previous years compared to the EUR 50 million improvement, rather EUR 50 million improvement on the EBIT level. I think this is the only thing that we should keep in mind if we look on the year-on-year performance. It's also just a snapshot now after nine months.
As Klaus will mentioned in his outlook, the improvement year-over-year at year-end for the 12-month period will be significantly higher than we can show it now after nine months. Page 29 on the balance sheet. Once again, also here we have the IFRS 16 effect, which we have shown through all the quarters in 2019 so far. We disclosed the lease effect on our balance sheet, which is shown in the lower part of the schedule with some EUR 750 million in total being higher balance sheet volume now. The other effect from the increase from EUR 7.5 billion year-end to EUR 8.9 billion after nine months in 2019 is mainly driven due to the harvest firsthand. All the harvest is mainly in the agriculture segment now. We're still waiting for the remaining corn coming in in October.
Additionally, we have some EUR 500 million increase on the project levels within the renewable energy business to EUR 1.5 billion on inventory so far now after three quarters. This is expected to be offset by some, let's say, EUR 500 million-EUR 600 million on projects going out in the final quarter and also delivering not only the cash in and reducing the overall volume on the balance sheet, but also bringing the remaining profit for the year that we expect. The situation this year is somewhat different to what it was last year. If you remember last year, we always said we are waiting to this huge project on Don Rodrigo in Spain, which was a huge contributor at the final months of 2018 on the renewable energy performance.
This year, we're also expecting it coming in the months of November and December, but it's not only one project, it's currently eight, nine bigger projects, but smaller than the Don Rodrigo with 175 MW that it was last year. It's mostly the same story, but with a different project mix within the solar and wind business. I think that should be it on the group financials.
The most important, I guess, is the outlook and kind of forecast. We're not giving a guidance, as you know that, but Klaus will probably estimate a little bit on the outlook for the full year, which is the most interesting thing for you guys. Thank you.
Thanks, Andreas. Outlook, as I said last time, I do not want to provide you anymore, as long as I'm in charge here as CEO, with a guidance as I did it last year, because this is creating artificial pressure, which is nonsense in the commodity business. People who are expecting a clear guidance, which means a figure, do not really understand our business here. What is the outlook? Well, as planned, BayWa will finish 2019 with a significantly higher earnings than in 2018. What significantly means, it's up to you to calculate. I think that the agri and the service agri business, the machinery business and agriculture segment, well, especially in the commodity business, as I said, the markets are still challenging and we will not see any change with a significant upside potential.
I guess that we have a high market potential due to our higher grain inventories, and we believe that there will be a little recovery in the demand for agriculture inputs due to the delayed autumn seed sowing. We will see a little catch-up there. Agriculture equipment, as I said, will have a very strong final quarter if the manufacturers are able to deliver their devices. Global produce, good harvest to be expected in Europe, so far the marketing activities and opportunities will be positive.
The flood of apples coming from Poland is more or less over because Poland is able to export apples to Asia, which we can't do, especially not in China. T&G, the performance also due to some one-timers, will be excellent. So far, we expect a very high or much higher profit than last year. Building material is stable.
We will have a good start of the fourth quarter. It depends a little bit on the weather situation. If winter starts late, it's good for the building material business. If winter starts early, it's good for the conventional energy business. Make your choice what you prefer. The energy sector will provide this year, really again, the record of profit, especially our friends from the renewable energy sector. As I said, we expect to sell more than 660 megawatts internationally. Globally, of course, that's our most developed international business besides the global produce. At the end, as I said, significantly higher earnings than in 2018. That's from my side. Mr. Radeljic, what are we going to do now?
Thank you very much for the summary of the third quarter. We would be happy to take your questions and opening the Q&A session now.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to ask a question. I will now take our first question from Oliver Schwarz from Warburg. Please go ahead. Your line is open.
Yeah. Thank you, gentlemen, for taking my questions. I will restrict myself to three for the first go. Construction. You stated in your presentation that revenues in the construction industry is up by 10.3%. BayWa's construction material segment, if my math is correct, has a number of -1.3% for the first nine months here. How do you explain that, let's say, a significant difference between those two figures? Why is BayWa not growing in line with the construction industry when it comes to building materials? That would be my first question.
Second question. Observation might be a problem of the snapshot effect you alluded to, but it seems like pension provisions hardly budged over the last nine months, neither quarter on quarter in the first quarter, nor in the second, nor in the third quarter. However, interest rates moved up and down, mostly down, however.
Those pension provisions don't reflect those effects. What's behind that one? My third question, mostly similar to the second one, if you might want to. You recalled, obviously, huge swings in EBIT, net income, but the share of minorities is mostly unchanged. What's the reason for that? Thank you very much.
Schwarz. Good morning, Klaus Lutz. First question, building material. You're absolutely right. Was a test question whether you are following what we are saying or what I'm saying. It's a joke. Of course, 10% up, that's right. The consolidation in the building material segment in our reporting is not only Germany, it's Austria and some CEE states where we have building material franchise partners. The gap is coming from Austria. What we did not achieve over the last three months in Austria is a catching up impact on the P&L statement for building material. To be honest, I don't expect it. So far, I see a flat development in comparison to 2018 in the EBIT. Germany is in a very good shape still. In Austria is a little bit under pressure.
May I ask if-
Yes.
Sorry. Yeah. Sorry. Yes, of course.
May I ask if Germany is up by 10% or is that not-?
Yes.
Okay.
We are absolutely in line with the market development and due to some own developed products, profitability or the margin development is also positive. We have to compensate Austria and the increase of our labor agreement with the ver.di union in Germany.
Very clear. Thank you.
Mr. Schwarz, the question on the pension provision, that's very simple. The pension provision will be only adjusted at year-end for the interest change. We have seen the interest coming down to 0.9%. It was 1.9 in the current provision from last year. That was up, I guess, from 1.75% to 1.9% year-over-year 2017 to 2018. It was 1.9% in 2018. It came down to 0.9%, so 1% over the year. This is the movement that we see mostly every year when it goes through the year. It's now up again at 1.15%.
That was the latest estimate at the end of October. We are not adjusting it every month. It's only be done at the year-end. You know that the change in provision will not have an effect on the P&L. It goes directly into the, or against the equity, one could say.
Just to give you a rough estimate, a change of 1%, or mean 100 basis points on the interest rate would mean a change of equity of around EUR 30 million. This is the estimate which could be made. What we expect is through the months of November and December, as we saw it all the years before, a slightly increase of interest rates again from this 1.1% that it is now to 1.2%, maybe even 1.25%, whatever we best guess. At least, let's say half or 50 basis points might be expected as change of interest rate on the pension provision that would then result in a change or let's say a reduction of equity of EUR 15 million. Okay on that?
Yeah, absolutely. Thank you.
The share of minorities that you mentioned, the minority is quite the same. It's mostly driven by the result of our Austrian friends, where we have only 50% in. They are performing better year-on-year on the agri businesses and then the other part, mostly stable. The second thing is the improvement of the T&G result. That's also contributing with 25% into the minorities. This is mainly the reason for keeping it mostly stable year-on-year.
Sorry. I think I didn't make myself clear. I was not alluding to the share of minorities that you receive, but to the share of minority shareholders in BayWa assets that lead to a cash outflow to minority shareholders. That which was mostly stable.
Cash outflow.
Yeah. Well, the net result, obviously, part of that is recognized as going to BayWa shareholders, and part of that is to minority shareholders in BayWa assets, right?
You're now reflecting on the P&L statement?
Yeah, absolutely.
Yeah.
The very last line, basically.
Yeah. We have the result or the net result of EUR -1.5, and this is coming of a + EUR 18.9 from the minority shareholders.
This is mostly the 50% shares of the good results from Austria and the 25% from T&G. Within the parent company's part, this is mostly reflected by the minus on net results within the renewable energy business, which is still expected to come.
Okay. Yeah, I was just puzzled because basically your EBIT, your net income was fluctuating, obviously net income. The EBIT has improved materially. The share of the minority shareholders in those operations don't seem to move much. That's basically what I was wondering about.
Yeah. I would guess it's just the picture after the nine months that will change when it comes to the full year period.
Okay. Thank you very much.
Yeah.
We will now take our next question from Heinz Müller from Dr. Kalliwoda Research.
Yeah. Good morning. Heinz Müller, Kalliwoda Research. I would like to raise three questions. You mentioned you will attend the trade fair AGRITECHNICA next week. Do you hope to improve your business, especially with regard to the innovation and digitalization segment? The second question is regarding your photovoltaic components business, which developed very well. Perhaps you could give us an outlook for the next year. The third question is, decisions of the government regarding the climate pact are not very positive for heating oil. How do you think it will influence your business? Thank you.
Dr. Müller, thank you. First question, AGRITECHNICA. Well, I don't think that we will be on the same profit level with our machinery business in 2019 to 2018. We will have a gap of a few millions. Clear figure, I can't provide you. Secondly, the expectation for the AGRITECHNICA is that our new product portfolio, the applications, cloud-based, are finalized by FarmFacts, that we are able to sell more licenses. Especially, my hope is that the perception of the agri market, not only in Germany, but in Europe, for this AAG application. This communication software between all the agri devices and machinery activities will be very, very positive. That's my expectation. AAG means Agri Application Group, which is a cooperation of six manufacturers and BayWa/FarmFacts.
Two years ago, we initiated this process with AAG on the AGRITECHNICA, and now my expectation is that now the performance of the products have been tested by our partners and that this will be the start of a standardization process for the communication software among the different devices. That's the key expectation. To be realistic, I don't see a significant upside on the revenue and profit level for 2019 now in the AGRITECHNICA. I know sales guys are always telling about big deals and transactions on exhibitions, but in this case, I don't expect much. For me, it's much more important that the market replies positively on our new innovation package and this AAG cooperation, and we are also open for other manufacturers to be part in this cooperation.
It will be a very positive outcome of AGRITECHNICA if some more manufacturers are willing to sign an agreement to be part of this cooperation. What you need here is market penetration. You need licenses, and you need, especially, a lot of Agri devices to put in a communication mode, which will help us afterwards then to sell applications, for instance, fertilizer application, crop protection, or farm management applications to the farmers. In other words, this AAG group is for us, or should be for us, the most important distribution and sales channel. Second question, outlook for solar. Over the last years, especially in Germany, we went through a very complicated period with losses, which was not really dramatically due to the overwhelming success of our project business. We stick to the market and we made some acquisitions.
We are now number one in Europe, and we are back on track insofar as the market circumstances, especially in Germany, have been stabilized and a little bit calmed down. It's not always a discussion about EEGs and feed-in tariff and all these things and the changes. So far, the development was now very positive, and we have a significant profit. Well, can we make an exception here and to tell the profit just to create some trust on this? Normally, we don't do it.
No, what we can say is that the components have increased up to 90% compared to the previous year.
Yeah.
Taking into consideration the wind issues and the tender issues in Germany, we do expect also for 2020 a further good development in the demand for solar modules.
Solar modules + 90% and plus also double digit in 2020 means, of course, an increase in profitability. Nevertheless, the price for modules, for hardware, so to say, is always under pressure. The margins are under pressure, and you need to create higher volumes to be on the profit side stable or to create a more positive profit. Thanks for this, Mr. Radeljic. The climate activities and actions and laws and so forth, especially in Germany. We, as BayWa, we see much more positive impact on our business as maybe in other industries and other companies. Why? Because we made some changes in the company structure already in 10 years ago as we started with our e-business, which is the most important pillar meanwhile, for BayWa.
This will be expanded over the next years, again, significantly, especially if we have a partner on board. With the new financial resources, which will be dedicated completely to RE, I'm very, very positive. I know the business plans, and the business plans are conservative. Nevertheless, if you compare with the overall profit development of BayWa, RE is going to be much, much more important as it is right now. It is so important already. So far, nothing which is negative. Heating oil, you mentioned, of course, that's a point, fair point. We are working on two sides, so to say. We don't have the new strategy where we can say, well, that's new strategy now, we put it in place and all is fine.
For us, that's not new, it is clear that we are in a cash cow mode and this now for many years. The market is shrinking for many years. If we have now this different activities of the federal government as of 2026, we are not at all surprised. You have two opportunities or possibilities. The one is you create joint ventures, you acquire market shares, that you improve your cash cow mode. To acquire market share means without investing money or a lot of money. That's the one thing. We are discussing that also with potential partners. The second opportunity is to be in a permanent restructuring mode using the cash flow and the positive profit in our heating oil business to restructure this business segment of BayWa. In reality, we are doing both of them.
We are in a permanent restructuring process, plus discussions with market participants to combine our businesses to use this opportunity. At the end of the day, we have, of course, the need to put a new strategy in place. The question is only, can we do that with the skill profile which we have right now? You know, Mr. Müller, I'm very experienced in restructuring businesses.
Well, this is normally not possible. It has also to do with exchange of skills with regard to pellet business, for instance, or full service provision to customers with regard to heating systems. We have a subsidiary, which is called EDL GmbH. That's a business where the scope is to take care of heating systems in buildings, in households and so forth. There are some discussions around. We are not through this process. It's not easy.
On the overall P&L statement of BayWa, I do not expect of the next years a very negative impact due to the heating oil issue, so to say. Is this enough for you?
Yeah. Okay. Thank you very much.
Our next question comes from Anne Margaret Crow from Edison Investment Research.
Good morning, gentlemen. Thank you for taking my call. I'd like to drill a little deeper into the digitalization business. It would be good to have a little bit more color on your comment about the infrastructure not being good enough. Also a bit more color about internationalization and which markets particularly you are intending to focus on. It would be really helpful having a view of the fit with the other bits of the agricultural business, given there was a comment about this should help you sell more agricultural inputs.
Okay. Digitalization, I think you mean the Farm Facts activities, because we have several projects in place. The first one is an internal digitalization and optimization and automation process internally in BayWa. Second is the e-commerce process for our customers, which has an internal impact as well. The third one is Farm Facts and automation.
Yes, FarmFacts. Yeah.
Let me comment a little bit on FarmFacts. We acquired this company a few years ago for a very cheap price. We developed a complete product portfolio and application portfolio for the farmers. If I say the infrastructure is not in place, and it's insofar a disgrace as, for instance, the mobile telephone or cell phone telephone infrastructure in Germany, you can compare with developing countries. If you, for instance, make a phone call in the middle of nowhere in South Africa, where we have a joint venture with Barloworld , for instance, and it's not a problem to make a phone call to Upper Bavaria, for instance, or to U.K. or London, wherever you are located. It's not a problem.
If you are countryside in my home place, for instance, 30 kilometers distance to the headquarter of BayWa, then it's very problematic to have a stable line. Of course, as long as this is the case, you have also problems with the connection of devices and with the e-procurement, because from a logical point of view, you need to combine and to connect the devices plus an automatic procurement system, which means e-commerce with BayWa.
As long as the farmers do not have the feeling that this is absolutely secure and stable, they are hesitating to invest money in FarmFacts or digitalization products and activities. What they want is consultancy. In Germany, you don't get any money for consultancy because the farmers are used to being treated and advised by the government and some local authorities, and this is normally without any cost.
That's a different approach than, for instance, in U.K. My demand, and in public speeches, I'm always criticizing our government and the big telephone companies here in Germany, that we are not in a position to be really competitive due to this lack of infrastructure. That's what I wanted to express. We can't change it. This can be changed only by the government and some regulations. Nevertheless, we have the portfolio, and on the farm itself, without this connection to BayWa, to e-procurement and so forth, it's now time to explain to the farmers, and we use this opportunity now in the AGRITECHNICA, that this AAG cooperation is very useful for farmers. The most important question farmers are always asking is, are the data really protected? What about data privacy protection? Of course, it's cloud-based.
Of course, there's always some insecurity, which is normal in this type of technology, no doubt about it, but we do all which is legally state-of-the-art to protect the data and to protect the farmers. Farmers are always concerned that some third parties have access to financial data especially, this has to do with trust in our systems, trust in the BayWa technology. I think we have here a very good position in comparison to our market competitors in Germany.
With regards to the internationalization, I do not mean U.S. or Asia or so. I think at this point in time, nobody is really waiting for some digitalization activities from BayWa over there and overseas. With regards to FarmFacts, we look for opportunities in U.K., in France. Austria, of course, is home turf and some Eastern European countries, so the CEE.
The next step must be U.K. and France. In U.K., BayWa has a very significant and positive market development, and also our market position in the grain trading especially is very good. So far, it's obvious that we continue with our internationalization process. In U.K., of course, Brexit creates again some insecurity, but it's more a local business, and so far, I don't expect some hurdles here. The subject automation is very important. We are a partner of Google in Abundant Robotics, and the prototypes for the robot harvester is more or less ready.
We used two of them in New Zealand during the apple harvest season, this will also be very important for our future digitalization business, because if we are through the process of checking out whether these prototypes are technically state-of-the-art, if we are through this process, I think we have a very good chance to sell those types of robots to either Maschinenring, which is an inventory or machinery cooperation in Germany, or to also some bigger farmers in Germany and also in other countries.
It's completely independent on whether Germany or other countries. It's an international approach, an international business, you are going to replace with one of these robot 25 workers in the harvest period. If I say replace, you replace them 24/7. This will have some significant impact on the structures during the harvest period for the farmers.
That's a little bit the outlook which I see and which we have. To underline that with figures is really too early, I guess, that the automation will be a very important aspect for farmers to restructure the farms and to improve the processes on the farms. Otherwise, they are not at all competitive. The competitiveness of European farmers is complicated enough without any CAP 2020 from the European Commission, it's not easy to survive in the market. I think, and I expect that through the automation and digitalization process, the consolidation of the farmers, and especially the small farmers in Europe, will be increased rapidly. Is this enough for you? A little bit about the automation.
That's really helpful about the automation.
Okay.
Just my final question, how it fits in with the rest of the agriculture business.
That's interesting. It's a disruptive approach, and so far, logically, it doesn't really fit in the classically conventional agri business because processes will be changed. Logistics and supply chain systems will be radically changed, and we will have a new structure. We are working right now in BayWa to reduce our capital employed and capital invested in the German agri business, which is a heavy asset-oriented structure in comparison to our international business, which is managed in Rotterdam, in the Netherlands, where we have a light asset structure.
We need to change the heavy asset structure to a light one because the costs are too high, the capital employed is too high, and the returns are too low. The answer is optimization, digitalization, and automation. Insofar, you will see over the next two, three years, it's not a revolution, it's an evolutionary process.
We will see over the next years some significant changes in the structure of agriculture itself, but especially also of BayWa with regard to the customers. I need to go into details to explain what we are doing here, but the key message for the capital market is BayWa will reduce the capital invest, capital employed in the German agribusiness significantly, and we don't talk about EUR 10 million. This has to do with the digitalization.
Again, some headcount reductions will be expected. Change in the skill profile of our people is necessary. You need more consultants. You need more people who really understand the digitalization process, the applications, and who can also explain the complexity of all these robots which will be put to the market over the next years. This has, of course, a really significant impact on our traditional business.
Thank you very much. I'm working on a little report on agricultural technology, so that's really helpful. Thank you.
Well, if we can support you also with our specialists and experts here, don't hesitate to call me.
Thank you.
My argument. Just the two of us, we get that done.
Thank you. That'd be tremendous.
Yes.
Our next question comes from Ingo from Pareto Securities.
Good morning, everybody. Thank you for taking my three questions. First one on renewables. Obviously, you made important sale already in Q3. My question would be whether we can expect in the coming years a little bit smoother development of the business over the entire fiscal year. So far, it's very much back-end loaded. Can we expect a more balanced development of that business in the coming years as it gets bigger within your portfolio?
Second question as well on renewables, which is really going through the roof, as far as I can see it. Doesn't that attract more competition in that field? Maybe you can add a little bit color what is going on within the competitive environment here in that field. Thirdly, I saw in a document that you mentioned that the sale of the fuel station is imminent.
Probably you will not provide numbers here, but maybe some remarks how far you are in the process would be helpful. Thanks a lot.
Thanks for the questions. I'll start with the third question. Of course, at this point in time, we do not want to provide figures to the market for a lot of reasons. I hope for your understanding, and this is really very important. We are in the closing process right now, and we expect 31st of December this year that we are through this process, and then, of course, we go to the capital market immediately and explain what's happening on the fuel station side. The reason why we did that has to do also with the question of Mr. Müller. We did that because we have a ECOnomics, eco, E-C-O-nomics project in place to become much more green company, a more sustainable, environmental-oriented, and also to try to create businesses and new business models in this ECOnomics scenario.
Of course, the fuel station business, I think is in a peak right now. We have all the discussions around the traditional cars and diesel and all that stuff. So far, I think it is the right time to sell this operation because I do not see a really brilliant future ahead, and we are going to invest more and more also in e-charging stations in Germany. We are with one e-load charging cards market leader in Germany, meanwhile. Maybe you have heard that the federal government is going to support round about 1 million loading stations all over Germany. BayWa will play here a significant role or an important role, hopefully. Your first question, smoother development. I'm not quite sure whether I understood what you really mean. Smoother development, I do not want to see.
I would like to see a much more aggressive development, especially on the project side, because we have opportunities in the markets which are really extraordinary. With markets, I mean the global market. Taking, for instance, Australia. Australia is becoming more and more important for us. Japan. Japan is changing more and more their energy policy, which does not mean they are leaving the nuclear power policy at all, but the renewable energy business is going to play a much more important role as it was in the past. The same applies for some Latin American states. In Mexico, for instance, we won a big project, in Malaysia, Indonesia, and so forth. We are more or less all over the world in the project business.
The reason why we are looking for further stakeholder and shareholder in this company to bring fresh money to the party is that we see much more opportunities as we are able to handle right now or willing to handle right now. We have 10 GW at this point in time in the pipeline, and we are selling, as you have heard this year, 660 megawatts. There's really room for improvement. The bottleneck I see is not the financials.
The bottlenecks are the experts, the engineers, project managers, and people with the right skill profile. Nevertheless, if I understood you correctly, that you mean a more balanced structure of r.e. I understand what you are saying, and this I support internally as well very much, because just to depend on the project business at this point in time is not a risk at all.
Over years, you never know what's happening in the project business. We are very flexible from a cost point of view. Nevertheless, this could be a risk. This is the reason why we stick to the solar module trading business where we are, as I explained before, in a very positive shape. We are creating more and more maintenance and service contracts with customers for the wind and solar facilities they have on the balance sheet. We are becoming more a service provider and a solution integration provider to customers. I think that this will be, over the years, a very important business pillar to balance a little bit the ups and downs in the project business.
You can compare that with the development of the IT industry, let me say, 10, 15 years ago, where the solution integration business and the service business became more and more important in comparison to the box shipment, as we called it. I used to work for this equipment. So far, you are right and we are working on that. Nevertheless, the most important pillar from a profit point of view and also the workload for the employees in BayWa r.e. is, of course, the project business. Is this okay for you?
Maybe I can make myself a little clear. I was just referring to whether the project sales will be smoother over the fiscal year. More in Q1, more in Q2, more in Q3 than having it all at the last quarter. That was where I was referring to.
I understand your point, unfortunately, we can't plan that. It depends on the projects, on the options, on the development on the projects. I understand for analysts that's complicated or not easy to make then a fair judgment whether the results come or not. In the past, over 10 years, we never had a problem with meeting our goals. The ball is always a match. With other words, if you say we bring a higher profit as the year before, for instance, it will come, even if it's just a question of a few weeks. This is, of course, it's a subject always to be discussed internally, it's always the same answer. You can't plan it. It is as it is. This is the business model. That's the type of business in which we are as a project developer.
The good news is that we know exactly how many projects, how many megawatts are in the pipeline. I tell you, as long as we have such a run on these projects from the investor side, I'm absolutely relaxed, and we know already the outcome of 2019. Unfortunately, due to my statement, I do not want to give a guidance to the market. I can't tell you the figure. We know the figure very, let me say, well, there are always maybe once upon there can be an event which is problematic, but we know exactly the outcome of 2019. Just give us some trust, and you will not be disappointed.
Okay. Thanks a lot.
Maybe you asked the question regarding the competition and the overall environment in this field. I think as Professor Lutz pointed out, we have a huge pipeline. We recently acquired, even in the U.S., a pipeline of 1.3 GW. I think there's a lot of work for us to do. In terms of competition in Germany, I'm not sure if you know these guys, because they're not just stock-listed companies. In Germany, it's wpd and Attract, juwi, who are type of competition. Internationally, it's Einstein, Encam, WPO. Yeah.
The large utilities are talking a lot about renewable, but they don't have the expertise. They don't have the experts, and they have to take care of the losses in the conventional energy business in which they are. We don't talk so much in the public about it, but we are very successful. That's the difference. Maybe this is our differentiator, right? Is this answering your questions?
Absolutely. Thanks.
Next one.
Our next question comes from Michael Schaefer from Commerzbank.
Yeah, good. I hope that I can get some answers on my questions. I have three of them. Good morning, gentlemen. First one, Mr. Lutz, on your statements on the input business that you have a rather encouraging outlook heading into the fourth quarter. I wonder, coming from a drought-affected 2018, and now with some decent rain seen over the past couple of months, probably also in your service areas, and wheat prices rebounding nicely and also the future looks quite encouraging. I wonder whether you can shed some light on how you see the input business, primarily the fertilizer business, evolving throughout the fourth quarter. What's basically the farmers' appetite there? Maybe some quantification, what you see the business being up year-over-year, would be helpful.
The second one is on your statements on soy trade, that basically the U.S., China wrangling basically held back business or at least put a lot of pressure on the European side, because the U.S. basically reverted volumes to Europe, putting pressure there. As it looks like right now, at least the Chinese opened the door, to get more inputs, more soy from the U.S. The outlet is changing again, so the trade flows are changing.
I wonder, if this continues heading into 2020, how do you see basically, your soy trading business, or your volume-driven business, let's put it that way, in more general terms, evolving into 2020? Last not least, on the ag equipment side of things. I wonder, given the strong order book you're indicating, so what's the problem with CLAAS basically, so that they are not delivering?
Has this something to do with any kind of timing issues related to AGRITECHNICA? Do they have production issues there? Any kind of quantification what you are missing there? Is this basically the EUR 2 million delta compared to last year, which you are missing in the third quarter and then heading into the fourth quarter? Really, what's the issue there with CLAAS? Thank you.
Mr. Schaefer, thanks for the question. I'll start with the last one. It has to do with the manufacturing capacity. As always, we have a gap of EUR 3 million, comparison to 2018. It had to do with, let me say, reluctance of the farmers a few months ago due to the uncertainty in the agribusiness and weather conditions and so forth. Suddenly, the order intake came. We were also, to be honest, a little bit surprised. We have a gap of EUR 3 million. A few days ago, we had our business review with the management, and they say the management is convinced due to the order intake, we have the chance to close the gap to the previous year, so EUR 3 million. Of course, we are only as good as the manufacturer is, and this has to do with the manufacturing capacity.
I will have some discussions about that also with the top management of CLAAS in the AGRITECHNICA fair. The confirmation of our management is to close the gap. In other words, we will be in the position to provide the equipment to the farmers. Nevertheless, I'm a little bit more careful. I learned my lessons over the last 12 years, so it's not always the case then that you have 100% performance, with regard to the manufacturers and also our organization.
The bottom line, I'm positive we close the gap. To the soy trade, which is very important, as you know, for Cefetra in Rotterdam this year, the business is very complicated. I pointed out that the profit we have in the past is mainly based on our specialty business and the soya and some other commodities that's more or less a zero euro-based business, unfortunately.
We know that the news agencies had some news with regard to a potential agreement between the U.S. and China with regard to the trading hurdles. Over the last 15, 12 months, we had a change of the commodity flow in the world. Latin America, Argentina, Brazil, exported soy to China. The U.S. guys, the farmers, exported to Rio de La Plata in Argentina, to the crushing mills, and we imported. From Argentina, U.S.-produced soy to Europe. Of course, this is a complete chaos. The logistics costs are very high. Even our functional margin, which is normally, I say bet is a little bit too much, but it's realistic to create such functional margins, were here not very successful. Not because the management failed, but due to the complicated market flows in this world.
If there is a change now and we are coming back, let me say, more to a structure which we were used to over many years, then I'm convinced that soy will, in 2020, will be back on track, and we will make some nice profit with soya because we are the most important supplier to the compound feed industry in Europe. There is no way without BayWa and Cefetra in Rotterdam. Well, it depends now on the political decisions and what is coming true. If you look back over the last weeks, we had again and again some positive messages from the U.S. government, and then came some more, let me say, skeptical comments from the Chinese side. We will see. I don't know. It's unclear. The inputs, yeah, do you want to make a comment on that?
Yeah. Maybe a couple of words about the input business. As we stated in the report, we do expect a catch-up in the input business. The demand for fertilizer was quite low in the third quarter. For that reason, we do expect a catch-up effect. What we are missing is definitely the rapeseed business, that has decreased, and I think it will also depend from the prices. As you know, the bigger production companies have reduced the production in order to keep the prices high. It will also depend partly from the price.
The rapeseed was a very important commodity in Germany over many years. We have a reduction of 25%, which is, of course, significant, and we feel that in the first nine months.
Okay. Can I come back to the BAST situation there? Looking at the nine months, you lost something like EUR 13 million EBIT every year. Is this primarily due to the, let's say, partly positive functional margin in the trade flow, or is this integrating, basically?
First of all, we lost from this, what was it, EUR 13 million gap to 2018, round about EUR 10 million come from Iran, from this political situation with soya and what was else?
These two things.
Iran, we stopped the business, as you know, because we have to protect our people. Of course, the shipment, the export of agri resources and agri commodities is legally allowed due to the Charter of the United Nations, but Mr. Trump decided to put on the blacklist ship owners, vessels, and financial institutes. That is really hypocritic what's happening here. Our friends and colleagues from the ABCs in the United States are doing the job now, and we had to stop it just for security reasons. This is around about EUR 4 million, and the rest is more or less our commodity business and due to the problems and the different flows on soya. It's not in principle a functional margin problem.
The profit, as I said, I would say 90% out of this EUR 10 million, I don't have a clear split right now in front of me, is coming from the specialty business. With other words, it's extremely important to expand the specialty business to have a more stable profitability and also a sustainable profitability in this international trading business.
Klaus, if I may add to the situation on BAST, Mr. Schaefer, a portion of around EUR 4 million is related to a lower U.K. business in particular, due to the low demand from the feedstock industry over there, because we had a very mild winter seen there and a lower demand on products from BAST, in particular in the U.K. The U.K. business normally is very stable and very strong, and that was an effect of EUR 3 million-EUR 4 million in particular in this year's performance so far.
Exactly. 1 million-2 million is malting barley because the demand also from the distilleries in Scotland and so forth. Whiskey, you have to drink more whiskey, please, that we have a higher demand in Scottish whiskey. This is an order now. We are suffering a little bit under that as well. Of course, but it's not to be defined on clear figures. Of course, the Brexit chaos in U.K. is also affecting our business and, for instance, our operation in Glasgow, Cefetra Limited, they are exporting commodities to Spain. That's a very traditional business relationship, and it's more or less a standstill. There's no reason at this point in time, but it's more or less a standstill in this export activity.
As many other industries and companies as well, we need a clear decision what's happening now with this bloody Brexit.
Okay. Thank you. I'll go shopping now.
You are not sure they need it. This is allowed. I don't care, by the way, because it's my opinion.
Our next question comes from Roland Pfänder from ODDO BHF.
Yes, good morning. Three questions, if I may, all on the agricultural segment. Firstly, I think you mentioned that you are reshaping your agri commodity business. Could you shed some more light, what are you shooting for in the next years? Secondly, agri trade and service, if I'm not mistaken, you had an EBIT loss in the third quarter. Could you explain this a little bit more in detail? The third question, more midterm strategic outlook on your international agri trading and the German business. How do you want to reshape it in a way that you generate decent capital returns in the end? Thank you.
You are talking about the reshaping and so forth. I speak about the German business. That's the first question. Business Germany agri. Okay? Your last point, how do we do that? Well, that's a very complicated reduction process. I don't want to bother you with details about all these measures we have in place, as it has to do with the digitalization and so forth.
The key message is as follows. At this point in time, we have around about EUR 600 million capital employed in the German agri business. I said before, we have to reduce this capital employed, because heavy asset-oriented significantly. This is not about EUR 50 million or EUR 100 million, it must be more. Detailed figure I can't provide at this point in time. We reduce the capital employed. That's the first thing. The second thing is, how do we achieve this?
Because the working capital for purchasing the harvest in Germany is as it is. It has to do with the development of the commodity prices, especially at the stock exchange in Chicago. That's the basic line or basis for that. How do we achieve it? We need to reduce our site structure and the number of sites we have in our core areas. This is prepared. This is a plan over two years.
We have right now only in the southern part of Germany, I don't want to talk about Austria and Eastern Europe. It's just about Germany because here we see really the necessity to make a turnaround process. We have a two years plan. At this point in time, we have a little bit more than 200 agri sites. It has nothing to do with the machinery business. It's just origination and input business, nothing else.
200, more or less, 220, I guess. We will go down to around about 80- 100 sites over the next years. This has to do with my statement, we want to become a more light asset-oriented company. If the revenue and the income more or less is stable, you have a lower capital employed and the return of the capital employed more or less automatically must be much higher as it is right now. The return will be, let me say, 6%-8% in a normal year. We have always ups and downs in the agri business. Especially there is one point we can't really calculate, that's the image problem of the conventional agriculture sector in Germany.
All people are talking about organic business and local business and eco business and eco growing of agri products, but the market share is still very low. So far there's a lot of political blah blah. Reality is completely different, but it creates uncertainty with regard to investments of the farmer. It creates uncertainty in the markets. It creates uncertainty on your side. The reality is that the conventional business is stable, but the margins are under pressure. We lost over the last years, per year, around about EUR 30 million gross margin. This needs to be compensated as fast as possible. That's what's happening in the German agri business. Is this answer enough for this point?
That's very helpful. Thank you.
What was the first? You wanted to answer the first question.
Well, I think, Mr. Pfänder, if I may, I'm coming back to this deviation and result you mentioned. If I got it right, was it the question, what happened in the third quarter? I guess that was your point, isn't it?
Yep.
You know, the third quarter traditionally is very weak on the agri business. It's the harvesting quarter where nearly no business is actually running. No input business is running because the farmers are out with the harvest and the marketing of the new harvest will only start at least at the end of the third quarter or in the fourth quarter.
If you look at the situation, meaning the result contribution after six months, half year on the BayWa business, it was 24 and it went down to 10. It's a minus of -13, -14. It's the same situation last year, where we had 11 after the half year or the first half year, and it went down to - 1.5. It's a similar situation. It's just reflecting the weaker business in the third quarter. We are EUR 10 million or what ahead of last year.
This is our postponing effects in the input business that we mentioned earlier that will come in the fourth quarter. We saw an upticking business also in the marketing on the harvest last year, which is expected also to come at least in November, December now.
Okay. Thank you.
Nothing special or nothing has happened outstanding in the third quarter.
Is this answer okay so far?
That's fine, yeah. Thank you.
We come to the reshape. Your first question of our agri-commodity business, you mean BAST, I guess. That's what I said, we need to improve the specialty business, what we did in the past already. I always said I would like to see on a regular basis, in a full swing, a normal year, EUR 40 million EBIT in BAST, light and lightest asset-oriented, EUR 20 million from commodity trading and EUR 20 million from specialties.
Maybe due to this lack of profitability opportunity in the commodity business, we need to increase a little bit our expectation also from a specialty point of view. That's the reason why we are in the market searching for new targets, for instance, for organic niche products, vitamins, minerals for the compound feed industry, and so forth. So far, we made some little acquisitions in the past.
Premium Crops in the U.K., for instance, Royal Ingredients in the Netherlands. Tracomex. How is everything named? Tracomex. In the Netherlands, we started a special feed component business within Cefetra and all these things. Of course, these are small companies, small businesses in niches. Very stable. Sustainable, stable, because the feed industry, the compound feed industry, needs all these type of components. Well, that's our goal.
From a cost point of view, if this is maybe also background of your question, we restructured BAST completely over the last two, three years. The cost-cutting process has been finalized successfully. We laid off some people, not so much, because we don't have so many employees in Rotterdam. We reduced, especially the overhead cost in BAST over the last years of around about EUR 13 million. That's the plan, and that's what we are working on operationally.
More important is, of course, and more complex is the restructuring process of our German agriculture business.
Okay, that's very helpful. Thank you.
Welcome. We cannot kind of leave here. It is very small.
Our next question is a follow-up from Oliver Schwarz from Warburg.
Thank you for taking my, I expect, rather quick questions. First one is on the rollout of your digitalization activities into Europe. Is this connected with additional costs beyond the level we are currently seeing? Given the statements you made as you referred to the lack of sound infrastructure in Germany, does that affect your business plans in regards to make that business profitable in the midterm? That would be my first question.
The second question is, Mr. Lutz, I heard you say you are investing or got into a joint venture or bought a participation in regard to e-charging stations. Why is that the case? I had the impression that the petrol stations and the heating oil business you currently have is basically a legacy business that is, let's say, not that core to BayWa, not that close to your heart, let's put it that way.
The e-charging stations, that would be also an asset-heavy business that's basically not connected to the other activities that BayWa has. What's the reasoning behind that?
We are not investing in e-charging station, but in e-load cards. There's a loading cards which we are providing to the Huh?
Tanking cards.
Tanking. Fuel is the wrong word. We are talking about electricity.
Huh? It's called mobility. This was Mr. Kemneter, our head of finance. Mr. Kemneter said it's called mobility.
Mobility solutions, Mr. Schwarz. You understand? Mobility solutions. What we are offering to customers are mobility solutions that's including the service of such e-charging stations, plus the e-charging, it's a type of credit card where we have 8,000 or 9,000 distributed already. Of course, it's also a type of give it a try, because we need some alternatives to the shrinking heating oil. We will see what's happening here. I didn't say that we are looking for a joint venture partner in this sector.
We do that on our own. Maybe this is a misunderstanding. I spoke with regard to the conventional energy sector, that this is one opportunity to look for a joint venture partner to go together with partners in a consolidated market environment through this cash cow mode. That's what I wanted to say. It's nothing to do with e-charging.
You're absolutely right, the fuel stations is not really in the bottom of my heart here, of anyone sitting around this table, I guess. Due to this ECOnomics strategy, it was for us clear that we are going to divest or we start some divestments here. It's not completely divested with regard to fuel stations, which is a part of the agri business and the machinery business, because this is closely linked with our traditional business.
Tassilo is a different story, so to say. With regard to FarmFacts, this is really a complex task, to be honest. What we want to do, at this point in time, we don't have the resources to do it due to our private placement of r.e. What we want to do, and we will start next year, we are opening also the FarmFacts environment for investors.
We are looking for a partner. You may call it joint venture partner, whatever, and this process will start end of Q1 2020. What should be brought from a potential partner to the party, it's quite simple. Infrastructure, know-how, and of course, financial resources as well. To answer your question precisely, I do not want to create additional costs for FarmFacts for the scale process on a European level. This needs to be loaded by a partner. Whether we will be successful with that or not, we will see, but the process will be started end of Q1.
Okay. Thank you.
There are no further questions over the phone.
I would like to thank you for your participation and interest in this conference call. The next one will take place here in Munich on the 26th of March next year. We will see us until then. I think it's also a little bit too early to wish you Merry Christmas.
Yeah.
Maybe some of you we will see in Hanover at the AGRITECHNICA. We wish you a nice week and a successful reporting season. Thank you, Mr. Lutz and Mr. Helber. Goodbye.
This concludes today's call. Thank you for your participation.