Good day, and welcome to the Baeba AG Half Year 2019 Financial Statement Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jasko Radelich. Please go ahead.
Good morning, everybody, and welcome to Barba's conference call on the results of the Q2 2019. With me are Claus Joseph Lutz and Andreas Heber, our CFO as well as the IR team. All relevant documents for this presentation is on and out this morning. Otherwise, as you know, you can download it from the Investor Relations website. And I hand over now to Professor Loeb.
Good morning, ladies and gentlemen. Pleasure to have you here in our telco for the first half result 2019. I would like to start with Page 4, just a few comments on the highlights for the 1st 6 months in 2019. But the most important message is, of course, that we improved our operational performance significantly in 2019 in comparison to last fiscal year, where we had significant pressure on the result in the 1st 6, yes, even 9 months. So the key highlights were, of course, the successful issuing of the green bond with around about €500,000,000 for our Renewable Energy business.
That's a great success because it was an attempt. In the beginning, we were, of course, not 100% sure that we get enough money. But after 3 hours, our finance department, together with the issuing bank, had to close the book because capital market offered us €760,000,000 So we are very proud of that because, as you might know, the Renewable Energy business of fiber is still in comparison to the very old fiber, a new business. For 10 years, we started with this business on the basis of the acquisition of Rennerco from Babcock Brown in Sydney. The second highlight was, of course, the start of the process, the proper process for the private placement for Baiva RE.
As we announced for the Capital Markets, besides the €500,000,000 through the green bond, we wanted to acquire another €500,000,000 through a capital increase for RE. We are in the process. There are no news at this point in time. The teaser has been placed in the capital market, and the feedback is really exceptional from the capital market, especially finance investors, infrastructure, funds and companies would like to participate in this capital increase. Important also on the basis of our Eco strategy is the sale of Tesol, the fuel station company, which is very successful.
We plan a transaction end of 2019, and that's part of the capital restructuring of our corporate portfolio, but as well as an improvement of our green image, but also the green business models, which we have. We are working on a lot of new business models, especially in the e mobility area and some others like digital farming, smart farming, precision farming and stuff like that. So the capital restructuring is important, and TESOL will be transferred to a 3rd party as soon as possible. I can tell you the process at this point in time is in a good shape. The feedback from the market, potential interested parties is extremely high.
So I'm very positive that the transfer will be successful, finished till the end of this fiscal year. And then on a digital basis, of course, that's inflation, always to speak about digital developments. So we launched our agriculture portal for Baiva. And we started on the basis of a new business concept, which is called building information modeling. We started in Bona, which is a little city close to Leipzig, we started the building process for houses.
That was the highlight picture for the 1st 6 months. Now we come to the real stuff. The figures, we have an increase of Page 5,
We
have an increase of 1.7 percent, euros 8,400,000,000 revenue and an increase on the EBIT level as well, 62.6 percent to €52,200,000 We'll see a little bit later that's average. If I compare that with the last years, last year, we were really under pressure. That was the statement from the capital markets and also some journalists wrote some articles about it. But this has to do, ladies and gentlemen, it's extremely important to understand that our business model has changed over the last years, and it's going to be changed more and more because Bioware is becoming a project company. And so far, the half year result is nice to have, so to say.
But the real profit and income increase will most in many fiscal years, all in the future will come in the second half. That has to do with the renewable energy projects, with the projects in building materials sector and also in the future for agriculture in the digitalization projects. And we know exactly, I'm coming back to that, what we have to expect in the second half of 2019. So the increase now in the first half year was driven by the energy segment, especially the conventional energy is in a good shape and performing excellently. Maybe surprising for some of you, but this has to do with the extremely high demand for heating oil here in Germany, a little bit in Austria, but especially here in Germany and coming back to that later, has to do with the climate change discussion in this country.
The agriculture segment, we had a very early start in the domestic agribusiness. You will see that later. The figures are much better than in the last years. We are not negative. We are positive.
And the international business by by across supply in trade in Rotterdam, handled in Rotterdam had to suffer a little bit under the low price volatilities and, of course, the U. S.-China trading situation. The bidding material is stable. We have still a boom situation in Germany with regard to the construction business. And that's stable, no surprise.
And other activities, we sold our so called Katobel 10, which has to do with the capital restructuring process we are going through. And the 50% we sold to RWZ in Cologne, which is another big cooperative, was already responsible for the operational performance of this GBH. And of course, there are also changes in the balance sheet and the P and L statement. Andreas Selva, our CFO, is coming back to that later. The change is based on the IFRS 16.
So approximately around about €7,000,000 on an EBIT level improved the performance. So Page 6, you see here the overall comparison for the 6 1st 6 months in 2019 in comparison to the other years before. And it's important to understand that's not an adjusted, not an operational or something else. EBIT at the real EBIT, 52,000,000 and that's more or less average. And this has to do, of course, that we do not have yet significant profit from our Renewable Energy segment.
And then taking this in consideration, 2017 with €72,800,000 or 2016, there we had already the sale of some wind and solar facilities, which is part of the profit. And we don't have this yet in 2019. So the situation is comparable to 20 18, where the last 6 8, 6 weeks were really the most important one to get the profit from RE. This year, I would say, is not so dramatic, but we will see most of the profits in the Q4. We come to the agriculture segment.
Just some highlights on this market development. International, the price trends for corn or soya is very flat. So no volatility, which means it's hard for an international trading company like Cepheida, for instance, to make profit, also to make profit with future in with regard to our hedging strategy. So it's a stable business. We are profitable.
You will see that. But at this point in time, an upside movement we do not really see. And that's also reflected in the world grain balance, the statistic you see on the right side on this chart. On the one hand, the global consumption is steady up. There's a steady uptrend to be seen.
On the other hand, the global inventory for grain decreased since last year. That's a significant change, around about 15,000,000 to 20,000,000 tons. We have a decrease in the storage, which is important for the price development in principle, but all the other parameters do not show us a signal that we can expect higher commodity prices. So it's more sideways movements to be expected in this business. Then the picture for our international activity was by gas supply and freight.
The revenue declined around about 8.5 percent, 2.5 €1,000,000,000 8,400,000 profit, so 42% lower than last year. And as I said, what's the reason for that, the low price volatility, which is hurting us a little bit and the oversupply of U. S. Soya in the soya in the European compound food industry feed industry. Why?
Because the United States are not exporting anymore soya to China, and this has been replaced by Argentina and Brazil. So far, we have pressure on the margins. We have pressure on the volumes. And this is one of the core business segments for fiber, agrass supply and trade, Cephitra. Nevertheless, our specialty strategy, which is not yet completely finished, we acquired a few specialty companies over the last years.
This specialty strategy is very successful and is compensating part of the decline in our international grain trading activity. So I'm very positive with regard to this new strategy. Royal Ingredients, a Dutch based company, is this year, for the first time, completely consolidated our balance sheet, premium crops as well and Tigra and some other little companies, which they are focused on vitamins, minerals for the compound feed industry, some organic products and niche products for the European market. And this seems to be very successful. And so far, the strategy is the right path we will continue.
On the next page, you see Page 10, the market developments in the other agri sectors. The import resources, the import business is not on the level of the previous years. It has to do with the climate change, with the weather conditions we had here in Germany. It's again dry. And so for the fertilizer, crop protection business, this means we have a downturn of volume and in so far also from the profit side.
But you don't see it in the figures because we are more successful with our especially German milling wheat business, which is very positive this year. The only input resources area which was very positive and successful is the seed business because we benefit from the big demand for catch crops and substitute for grade. Global produce, we are global player here, and the headquarters is in New Zealand and our plant here. We expect a very good year. Nevertheless, you don't see it at this point in time, and this has to do that we have a gap to the budget with the TCs for apples in New Zealand.
We are missing roundabout 1,200,000 TCs. The reason for that was that we harvest dry very high what was it now. We have a low volume due and a low quality for apples especially, and this can't be compensated completely by other varieties and fruits. So to say, we are a little bit under pressure here. In Germany, the prices are on a 5 year low because of the volume which is in the market.
We have still the apple flat, so to say, from Poland and other European countries because we are not allowed to export the apples to Russia. No change. It's always the same story for years now. Nevertheless, we expect from Global Produce a good year. I'm explaining that later.
Agri Equipment, It's again a very, very, very positive development. Nevertheless, we have a decline in the figures, in the profit. Also, the registration of tractors in Germany is up of 22% in comparison to last year. And the liquidity situation of our farmers in Germany and in Austria, said very stable. So the agri equipment business is in a good shape.
So let's go to the figures. Agri Trade and Services, so that's especially our German, Austrian and Eastern European business. You see an increase of revenue, nearly €2,000,000,000 and an increase of our profitability of EUR 24,000,000 to EUR 24,500,000. Important is that last year, we had a loss situation in Germany. Today or this year, the $24,500,000 is more or less carried by the German operation.
And the revenue growth is based on volume and the price development in our country. Next page, the global produce business, it's stable, small or less on the same level as last year. Nevertheless, we expect a significant increase of profitability in 2019, and there will be some one timer included because we are selling or we are in the sales process at this point in time for our operation in Mount Drilling, which is the F quarter of Jonathan Growers. So we come to Page 13. The agri equipment.
We have a stable revenue. The margins are a little bit under pressure. This has to do with an increased competitive situation in the areas where we are selling tractors, harvesters and so forth from Ecopad, especially glass. And in Eastern Germany, the demand for harvester is on a very low level. Nevertheless, the €10,800,000 is still a very good performance.
The 15.6% last year, this was really exceptional. Coming to the financial statement, Page 14 for the agribusiness. Here, you see the revenue is a little bit lower, minus 2%, CHF 5,600,000,000 EBITDA 19% higher. And the rest of the figures will be explained later on by Andreas Helve. The Energy segment, again, the key driver for the improvement in 2019 and at the end of the fiscal year, you will see that the energy sector is the most important pillar in the overall conglomerate picture of fiber.
So renewable energy, no change to my statement I made in the last conference in March. We have still a very good development on a global basis for wind and solar facilities. China, of course, is leading. In China, we do not have an operation. We are only sourcing.
But nevertheless, that's an interesting indicator. So I think that's enough to say it's a great business. And the conventional energy sector, it's interesting that the heating oil prices in Germany, in average, are higher than the Brent oil on the stock exchange. Why? Because the demand is extremely high due to the discussion in our country for a CO2 tax or any climate change related payments people have to do.
And of course, heating oil is not the cleanest version of energy, so to say. That's the reason why the heating oil prices were higher, and we are our profits are based on that more or less. So we come to Page 17. Renewable energy, we need not to discuss it at this point in time. It's more or less breakeven.
But we know we will have a record high for our results in 2019 as we headed over the last year. So the process is not stopped, and we will continue to improve the profit here. And at the end of the day, I think all of you will be very happy with the performance of Renewable Energy. The conventional energy sector, you see here, revenue plus 11.4 percent, price driven, volume driven and profit, CHF 11,600,000. I'm positive.
I'm very happy with that development. And you see the income statement, Page 19, increased 70% on the revenue side, then 32.2 percent of the EBIT and 12.1 the EBITDA and $12,100,000 the EBITDA. Very good development. We come to the Building Materials segment. The boom, construction boom is stable, 77%.
You see that on the right side of this picture, 77% of the construction companies, our customers and so forth, believe that also over the next 12 months, and there are some other studies over the next 3 to 4 years, that the construction boom in Germany will be very stable because the demand for new apartments, houses, flats and so forth is extremely high. P and L. We are stable on the revenue side, euros 775 300,000 and euros 7,000,000 is the EBIT. Profit at the end of the day will have more or less the same profit as we had it last year. The P and L statement, I do not want to comment on that.
Andreas will take action on that. Last point, the Innovation and Digitalization segment. Well, guys and gentlemen, of course, you see now year by year the big loss situation, which is the investment we make in our software portfolio for FarmFacts, our digital farming activity. And I do not want to comment on that today in-depth because I think the most important message is we expect some further developments also from the profit side now during the Agri Tecnica. The Agri Tecnica in Hannover this year will be very important for Baibars and PharmFx especially because we are going to start the so called AAG Corporation.
AAG means Agri Application Group, 6 manufacturers, plus Viva, plus Pharmtex combined in this type of cooperation agreement. It's not a real joint venture, but very strong cooperation agreement, where we are delivering for the tractors and all the other technical devices of the manufacturers, the interface, the software interface that the machines are able to communicate with one another. And this will be then part of the proof of the pudding of all these investments. Other activities. Well, you see here, last year, minus CHF 23,000,000 this year, minus CHF 40,000,000.
We have this CHF 7,000,000 impact on the IFRS 16 basis and the sale of the shares of the Potato Center of Bavaria is included here with around about €3,000,000 or 3.4 million and so far more or less usual stuff. And I would like to hand over now to Andreas Selva, our Chief Financial Officer for the group financials.
Yes. Claus, thank you. And also a very warm welcome and good morning from my side. Going to the group financials on Page 28, I will keep it rather short because the most important comment has already made and it's only the half time, the half year picture that we present here. But one remark is needed.
The as we talked several times about the IFRS 16 effect, which is going through the numbers in all presentation and all tables here that we present. And therefore, the numbers compared to last year are not directly being comparable. If you look on the numbers, the one remark that I want to make, and I'm coming back on this in a minute. And the other one that I want to point out is if we go back on the slide, you probably have seen it on the slide of Page 19, summarizing the energy results. There's one thing that we need to explain.
If you look on the EBIT number in there, which is reflected by €12,100,000 compared to €1,300,000 due to the very good performance on the conventional energy side as well, improvement on the renewable energy side by some €3,000,000 as well. But then if it comes to EBIT, it goes down to minus SEK 8. And this is also reflected on the summary of the income statement in total for the group. And that seems there's a dramatic downturn in that, which is not really true because this reflects the higher interest expenses that we have on one hand and also some hedging costs that we had on various currency projects in the renewable energy sector, which have not been capitalized for this half year period. So they are completely in the expenses because these projects will be sold in the second half of the year.
Therefore, they have not been properly capitalized on the project, but already included in the segment income statement. And therefore, that brings the EBIT up and the EBIT down by some, I would guess, €10,000,000 to €12,000,000 impact. So it's not the IFRS 16, which is reflected in here. This is a minor effect of €1,000,000 on the Energy segment, but it's mostly because of higher interest costs on the projects that we are currently working on as well as currency hedges on the various projects in different parts of the world. So this is important to understand when it comes to the Energy segment.
And now I'm going back to Page 28, just summarizing it. And we're coming back to this EBIT line of EUR 52,200,000, which is an increase by EUR 20,000,000 compared to last year. €7,000,000 out of this increase is related to the IFRS 16 effect, which is offsetted in the interest again. So the total effect of IFRS 16 on the P and L statement could be related to a higher depreciation by some €20,000,000 and higher EBIT by some €7,000,000 higher financial expenses as well, interest expenses by some EUR 9,000,000, which is offsetting the EBIT increase again in the interest. This is probably something the effect that you have in every each and every company you're currently looking on.
So it's nothing unusual within the numbers, but this is the effect which is included in the half year's numbers for Baiva. And this is all that I want to point out at the income statement. Also the EBITDA, as I pointed out, some €20,000,000 probably is related to the higher depreciation, which is returned of release in the EBITDA number. Then that brings it to €135,000,000 and the €40,000,000 improvement, this is the operational improvement that we have from the EBITDA level, I guess. On the balance sheet, just the impact on Page 29, also released to the long term lease liabilities, which we disclosed separately here in a line for clearance.
If you look at the long term debt, which has been increased from year end number 883,000,000 to 1.4 €1,000,000,000 that includes now €780,200,000,000 on long term and €22,200,000,000 on the short term leasing liabilities. So the €800,000,000 this is the total effect on the capitalization on the IFRS 16 on the asset side and reflected by the long term lease liabilities on the debt side. The good thing is that even with this lease effect now, our equity ratio stays more or less stable compared to half year numbers. In previous period, if you look on to 2015, 2016 2017, it's around 16%. Though at year end, I'm reflecting the total effect on the lease liability capitalized or the lease capitalization on the balance sheet and the equity ratio about 2 to 3 percentage points.
So I think we can handle it with our floating balance sheet number pretty good also here in this half year numbers. That should be it. On the balance sheet side, the cash flow statement reflects also the higher cash earnings, the higher cash flow from operating activities, including this IFRS 16 effect, And higher investing cash out is reflected by some real estate projects, in particular in Austria. The colleagues in RWA in Vienna are working on a new headquarter, which is under construction. This is one part which reflects here in this higher investing activities cash flow minus.
That's all that we should point out at this time of the year. I think it becomes more important when it comes to the 12 months period to reflect these numbers also to clearly point out the effect of IFRS 16 on these financials. That's repeat from my side on the half year numbers, and I return now for the outlook to Claus.
Thank you, Andreas. So outlook, as always, the same discussion. Guidance, yes, no. Answer, pretty simple, no. I do not want to give you the guidance as we did it in the Q3 last year because the business is too volatile and doesn't make sense.
It's not really useful. Nevertheless, I tried to describe what we expect what can we expect from BioMed 2019. I think the overall statement will be that we expect a significant increase of earnings in 2019. Agriculture segment, Page 32, as well, significant increase in earnings. I expect from the specialty strategy some positive impacts on the bus P and L statement.
I think that our Global Proteus business, as I said, with some one timers, will be on a very high earnings level in 2019. And the equipment business, well, depends a little bit on Agri Technica in November. Nevertheless, I expect a very high earning level as well, but not on the same basis as last year. Energy segment will be in an excellent shape, and the result will be extremely high. And go please to Page 34.
Here you see what we are going to do in the last 5, 6 months now. We had a plan to sell 660 megawatts, just the project. That's our project business. We don't talk about the solar module and other devices business. That's not included here.
It's just the project business. In North America, especially in the United States, 370 megawatts in Europe, 230 megawatts. And in Southeast Asia, nearly 60 megawatts. Last year, we sold around about 450. So you'll see the increase, and it's math to calculate what that means.
So we get a very good result in this business. And the Building Materials segment, we expect the same result as we had it over the last years. So it's a stable business. The boom is not broken. And so far, I'm happy to say we'll have a significant increase of profit in 2019.
Thank you.
Thank you very much, Professor Lutz. And Mr. Helber. We are now ready to take your questions.
We will now take our first question from Marc Gabriel of Bankhaus Lampe. Please go ahead.
Yes. Good morning, gentlemen. Two questions, if I may. First, with regards to your sales plan for the petrol or gas stations business, What kind of offers do you have? Could you give us a certain range of prices which are now quoted for that business?
And I assume that you are targeting for a huge book gain on that business, if you could quantify that a little bit in detail? And furthermore, I'd like to know how you assess the current debt situation and how the debt should be reduced going forward. Are there any other asset sales on the agenda, which you could share with us? Thank you.
Mr. Gabriel, looks here. Thank you for your question. Well, it's not easy to answer, of course, the first question. And I understand what you wanted to hear, but we are really in a proper process, of course, but we are already in negotiations, final negotiations with a potential partner to take over 100% of the shares.
Of course, I do not want to mention the intended price at this point in time. But maybe I can use a legal term, which is maybe helpful for you. It will have on the conventional energy sector as a onetime and a significant, really a significant impact on the bottom line. Is this useful for you? You can't expect that I tell you the profit will be, but it's not possible and legally not allowed, but it will have a significant impact on our bottom line in 2019 for the conventional energy business.
So that's a one timer. We will report that not in the Energy segment itself. We are going to report it under Sonstiges. That's the one thing. And the debt, Andreas?
Yes. Mr. Kapriel, on the debt on the liability side, it states the situation as it was the years before and also last year and the year end. The main contribution that has been made from the debt side are now in the circle of our inventories. We are at the half year, normally on the lower point and now getting back into the financing of the harvest coming to the year end.
And the main contribution is, of course, in this project that will be released in the second half of the year. So from just a rough guess, what I will see what I could see so far from today's perspective, I expect another return on cash on the cash side, on the debt side by some EUR 400,000,000 EUR 300,000,000 to EUR 400,000,000 out of the sale of projects until last year in the second half of the year on the renewable energy projects. We placed this bond, the green bond with some €500,000,000 which has clearly been dedicated to renewable energy projects. And you could see that also if you look on the long term debt side, which is increased by this amount, and the short term debt side, which is released or declined by a certain that amount. Therefore, I do not see higher deviations within these positions, yes.
But I'm expecting a downturn from half year to year end on the Renewable Energy side.
Okay. And maybe one question again regarding the gas stations business. I mean, the book value is 18 point $5,000,000 somewhat. I saw deals on the market, which paid roughly $1,000,000 for 1 gas station. Is that a fair assumption?
No, Mr. Gabriel, that's pretty much too high. Our first thing on when you say SEK 1,000,000 for 1 gas station, we have SEK 155 1,000,000, but it's only it's not the owning of the gas stations, it's the contract on delivering fuel to these gas stations. So don't do this calculation.
There's much
to first thing. And the second thing is, what I could tell you is the book value on this part we are selling on, it's only 3,500,000 Yes. Okay. This is only part of the 18. The 18 probably uses the whole conventional energy business, so the book value on this.
But please give us the time to close this transaction. It will have a significant impact on the P and L, but I think we will come back to this on the next analyst conference clearer. But for the time being, it's pretty much too early to give you a statement on this.
And maybe Mr. Gabriel and also for the other colleagues, there's a misunderstanding. Tesol, of course, is a separate legal entity as Tesol GmbH. But it's just, let me say, type of dispatching center with the fuel stations, which are part of Avia, the Avia Group, which is a very big fuel station, so to say. It's a mixture of franchise and supporter, supporting unit and so forth.
And Tesul is the largest shareholder of Avia together with, I guess, for others, yes, for others and for other groups. And the fuel stations are owned by private owners, entrepreneurs, and they are just part of this community, legally bounded, of course. And there's a contractual basis for the supply with fuel, with diesel and all that stuff and lubricants, of course. But Avia is providing the complete environment, the furniture, the technology, the hardware, software, computers, blah, blah, blah, all these stuff. And that's the reason why you see in Germany, but also, for instance, in Switzerland, you see very a lot of heavier fuel stations.
But yes, most of them, I would say, I don't know exactly the figure, but I would assume around about 95% are privately owned. Okay. Okay? And that's a little bit different as other competitors who are in the market. I know there were a lot of transactions over the last months with regard to the gas station business, but it's not comparable to the TESOL structure.
Nevertheless, it will be an important and significant impact.
Thanks for the explanation.
And if I may, just for clarification, we're talking about significant improvements on the performance, on the operational results, this excluded, of course, this Tissol effect, yes? So we are talking about the significant improvement that comes out of the agribusiness and it comes out of the renewable energy, also the classical energy, but the renewable energy business in particular. And this is all operational. It does not include any potential effects from this. Yes.
That's what
I'm saying. That's part of Sonstaget. Yes. If we have a high income for Tesol, and I assume it will be a good deal, of course, otherwise we wouldn't do it, then you will it will be reflected in the miscellaneous business.
We will now take our next question from Crow of Addison. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. I'd like to ask a couple of high level questions about the shift to project type work in the Agriculture and Building segments. So the first thing is, why was the decision taken to do this? Are the returns better?
Or does it give you better growth opportunities? I was wondering about that. The second question is, are you deploying any technology from the innovation and digitalization segment in any of the agriculture projects at the moment? And thirdly, do you intend projects in the agriculture and building segments to become as significant as the renewable energy activity longer term? And then I have an unrelated question, which is, are there any cross selling sorry, is there any cross selling of products from the innovation and digitalization segment to your agricultural supply customers at the moment?
Thank you very much for your questions. We'll start with why are we doing that? So well, I can speak 1 hour about it, but I would try to summarize it to a few sentences. Why are we doing that in the Building and the Agri business? So between the two segments, there are no synergies in principle, of course.
The project business in Building Material is, from our point of view, very important because we are over the last decades, we were just a the general provider of building materials to construction companies, carpenters and other professional customers. So now the question is, what can we do to stabilize and increase, of course, the profitability and to invest money together with partners. It's always based on a joint venture in building and construction activities is a add on and added value to our general and building material business and should create a higher stability for Building Material because if we have a downturn of the boom situation in Germany or Austria, then we will see that directly in our P and L statement. So the business has to do to minimize the volatility of the classical building material business. And of course, we expect higher profit.
We have business plans that's clear for the next years, but you can't compare it with renewable energy. Renewable energy will have also in the future much higher profit level than our building material business. And let me say, the process we are going through for creating this project unit. We just hired people, some building engineers, some project managers is on a very low level. As I said, we started now a project in Leipzig in Eastern Germany.
We finalized one project in the southern part of Bavaria. And that's it's more an attempt. Give it a try, and we will see what's going to happen here. And I'm very positive because the first results, just small money still, but the forecast, the outlook from the management and the performance, the operational performance of this new stuff, this new little entity that we created in building material is very positive. And in the agribusiness, why did we decide to become a project manager?
This has to do with change and the consolidation of the agribusiness, not only in Germany, Austria and so forth, but all over the world more or less. In the future, the farmer will not ask for a special, we call it color for a tractor, for instance. What he would like to see is a solution, solution of his operational problems. And you can compare that maybe with the 90s where this was one of my first board positions I had in digital equipment and digital teams, for instance, where we started to create a solution integration business. And that's a type of solution integration business, which we have to provide to the customers, to the farmers in the future in this business as well.
So software applications are playing a much higher role in the future. The processes need to be improved, changed to be more competitive on in this more and more global business. And so far, what we decided is nothing else than to meet the needs of the customers and to create more solutions for them. And this has, of course, a significant change for or means a significant change for the skill profile of this company because the normal sales rep in the future is maybe the lead generator. But in reality, you need project managers, software engineers and people who understand the needs of the customer, the problem a pharma, and then we provide the integrated solution to the pharma.
And we start now. My question was, is there any gross selling effect? Well, of course, for the manufacturers, FarmFex, the company owned by Baiva 100%, provides now, for instance, this type of communication software for the different devices of different manufacturers. That's an open system, not a system if you compare maybe you'll remember Nixdorf. Nixdorf had always proprietary systems in the software world.
And we do not follow this way. Some manufacturer try it. I think it is extremely dangerous because then you depend on the one or the other manufacturer. So all the systems must be open, must be easy to be connected with different devices, and that's what we are doing. And so far, while it's not really cross selling, that's the core of Farmpex with regards to the manufacturers and the core business with regards to the pharmacist to create then an interface to the farm, the processes on the farm and also the management software or the management system on the farm.
So it's a complete open system. It's cloud based and well developed, by the way, here in Bavaria, in Farkeerken, it's a little village in Lower Bavaria, where software developers, most of them have a farmer's background, are working on all these applications. And so far, I can only recommend go to the Agri Technical and get a very personal impression whether we are in a good shape or not. And you are more than invited to visit our farm our booth in the Agri Technical. And if I'm around, you get a cup of coffee by me by myself personally, okay?
So what was then project input was the other question? Did I answer the questions more or less?
Yes. Yes, you have. Thank you. That was very helpful.
As I said, visit our stand, you will then you see really there are some project software engineers around and can explain that in detail to you if this is for investment decision or whatever is important for you.
That's very helpful. Thank you. I look forward to it.
My pleasure.
We'll now take our next question from Canute Hinkl of Pareto. Please go ahead.
Yes, good morning, everybody. Thank you for taking my three questions, please. First on the outlook, am I mistaken that you turned more optimistic with regard to the energy segment at the backdrop probably of the good results in conventional energy. As far as I remember, last at the
end of last
year, expected a more subdued result and now expect a significant increase of earnings for 2019. That would be my first question. Second question, you alluded a couple of times to the drought condition last year. As far as I remember, we had also in 2019 a couple of very hot days here. So my question would be is, do you regard 2019 already as a normal year going forward?
Or do you expect more upside the mean, so to speak, in the coming years or on average. And third question, a detail. Could you help me to understand why registrations of tractors are up such a huge number like 22%. Is that a catch up effect? Or what is it?
And why don't we see more of that feeding through into your equipment business?
Thank you.
So thank you for your question. First of all, you're right. The Energy business and especially RE will provide a significant higher result in 2019. And as to just look at the megawatts, last year, 450,000,000 now 660,000,000 roundabout. And so far, it must be higher on the basis of a, let me say, competitive similar cost structure we had last year.
And what And conventional.
And convention, the conventional business. First of all, the fuel business is will be better than last year. The heating oil, and you see that you saw that and you see it already in the 1st 6 months, is much higher because there is a demand with regard to the maybe tax changes in Germany and, well, CO2, climate change and all these discussions we have in the country. And the same in Austria, by the way. And so far, the demand level of our customers is extremely high.
That's the reason why we have the side prices in the local markets and the better profitability in comparison to 2018. So energy is one key driver for the first half year, but also for the overall outlook 2019. Then your next question was with regard to the harvest. Do you mean that only locally? If you speak about Germany or Europe, we expect of course, we had some very hot days, 40 degrees and so forth, but it is not as dramatic as it was last year.
We expect a higher harvest in Germany, but let me say, higher than 2018, but a little bit below average. But this can be changed, and we must be very careful what we are saying here as European market leader. This can be changed within a few days. Of course, it depends on the weather condition. If you have thunderstorm or Hagia or whatever, then it can the potential harvest can be destroyed.
And we had to experience that all over the world in the areas where Baibars is as a agri or a global produce company. We had to experience that over the last years again and again that within a few days, the harvest was either destroyed or it was hard to protect the volume for the different agri products. But in general terms, I say that at this point in time, it's a little bit below average for Germany and Europe. And the last point has also to do with our discussion in this country with regard to climate change, CO2 output and all that stuff. The farmers are buying tractors, but also other devices at this point in time to avoid any as they believe and think, to avoid any personal damage by new taxes and whatever.
So to say that's more psychology, I think it's more psychology. The liquidity situation is very good of the German farmers because the milk price is on a reasonable level. And so far, liquidity, the fear of any additional taxes, the farmers are under pressure, and they would like to protect the private wealth. So cash in tractors, harvesters and so forth. And also to they believe that they have a chance to avoid any further tax or whatever.
And the 20 September, by the way, the federal government in Berlin is going to take some decisions where I don't know whether they will decide anything. But the plan is that Mrs. Merkle, the Chancellor and the ministers are going to make a decision on the actions to taken to avoid further CO2 output. And this has to do with all these, let me say, activities of our customers, the farmers.
We'll now take We'll now take our final question from LeVar Svein of Varpug. Please go ahead.
Good morning, gentlemen. Final question hits the nail on the head. I've got just one question left. And this is about the personal expenses, which went up in first half year of twenty nineteen by more than 8% compared to the level of last year's, while your number of people increased by only 3%. Is there something special going on?
Or is that just more high payroll people and or a higher amount of high payroll people? Thank you.
Thanks for the question. That's RE, renewable energy driven. We made some little acquisitions. People are on board, are now in our balance sheet, and the average payment for renewable people are much higher than, let us say, classical fiber employee. That's one thing.
Then we have this collective bargaining agreement with Verdi here in Germany and a tariff agreement in Austria, where we had an increase of, what was it, nearly 3%. And unfortunately, you can't ask your customers, to be very polite now in my wording, to ask the customer to take part of that so easily. Nevertheless, taking in consideration what we planned for HR, we are below our budget in 2019. We don't provide you our budget plans because it's again very volatile, but we are a few percent under our original plan. And so far, it's a combination of more people, higher paid people and collective bargaining agreement.
We have one last question coming to the queue from Mueller Heinz of Kaleiwodo Research. Please go ahead.
Yes, good morning, gentlemen. One question. Perhaps you could give us an indication about your cooperation with Unameera. So how many farmers are currently using this digital trading platform? And what do you expect will be the share of the sales of the agricultural division in the future via this platform?
Thank you. Mr. Muller, good morning. I'm happy to hear you. Well, it's a very good question.
And I question, by the way, my management as well, exactly with the same wording, more or less. First of all, that's a try, yes? The second point is nothing happened yet. It's just a cooperation with regard to create a trading platform. And we are right now in the process to get the approval for this cooperation from the antitrust office in Bonn.
And I personally do not expect very high contribution on a profit level. That's really a try. And it's it was such a to be honest, it was such a hard way for my colleagues to get this cooperation agreement agreed upon with all the participants. So let's give it a try and wait a little bit. I'm not so I'm not you hear you know me now for more than 10 years, Mr.
Miller, and you hear what I'm saying. I'm not so, let me say, enthusiastic it. But there are young managers. They believe in this platform world. It's not only with the agribusiness.
It's more or less in many other industries as well. And I think that it is not so easy to be very successful with that because farmers are reluctant to cooperate with platforms. They fear a higher transparency. They fear abuse of datas and all that stuff. That's the one thing.
And the other thing is, if you work together with other traders, as we try to do, they fear that you know too much about the margins. And so far, it's psychologically not easy. And I do not want to provide of course, we have a business plan, but I do not want to provide any figure for that because it's really too early. And you should not be surprised if it was a try. It was more R and D oriented research and development.
And at the end of the day, we stop it again. So I'm not completely negative and pessimistic, but I'm not so optimistic. Is this useful for you?
Yes, of course.
Thank you very much.
There are no further questions at this time. I will now turn back to your host for any
next conference call will take place on the 7th November this year. And until then, especially now for the remaining weeks, we wish you on hopefully a nice summer break and say goodbye and thank you.