Good day, and welcome to the Baiwa AG Financial Statement Q1 2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Josko Radylec. Please go ahead, sir.
Good morning, everybody, and welcome to Viber's conference call on the results of the Q1 2019. With me is Andreas Helder, who will guide you today through the presentation that we sent out this morning. At the end of the presentation, as usual, we will be happy to take your questions. And I hand over now to Mr. Andreas Heber.
Yes. Good morning, everybody, also from my side, and thank you for dialing in in this early stage this morning for the Q1 result of Baibar AG. Due to the limited meaning or the limited importance, as you know, this is always the Q1 call is the CFO affair, I would call it. The CEO, Carlsd, is not with us. We just shared him at our analyst conference here 6 weeks ago in Munich.
So just giving some comments, and I will keep it rather short for the time being on the Q1 results and on the start into 2019. This is done by the CFO only. I hope you would not mind, and I can answer all your questions accordingly. As Jessica said, we start with the presentation, and I will just go to the summary on Page 4, which stated mostly all. We had a quite good start into our, what I should say, quite normal start into 2019, given the very negative base effect from the prior year, which is minus 41% on result wise for the 1st 3 months in 2018.
That was not very difficult to achieve. So we have a drop in results. But if you see also on the next slide on Page 5, in comparison to the last 5 year, it is, as I said, a quite normal start. The other years have been affected by results contributions from the RE business in particular, but from the normal viva business, the agribusiness, the building materials and also energy, it's quite normal. We summarize it up to all entities are ahead of the previous year apart from our international activities in Rotterdam, the bus business, which is slightly behind the previous year, but I will come to that back in a minute.
Year on year, you see that we have a EUR 4,000,000,000 sales contribution, which dollars sales contribution, which represents nearly 25%. And the result is as it is typically for the start into our business with a minus number, minus 13.8, and we will come to that in a minute as we go into the specific entities there. The weather conditions within the 1st 3 months on those business, which reflect our traditional business, Agri and Building Materials, had been in favor, I should say, compared to the start in 2018. The winter was a normal one. It ended up we had a lot of snow in some areas in the south of Germany and in particular in Austria, But normally, the cold and frosty period ended up already in the mid of February instead of end of March last year in 2018.
So the business picked up earlier. The farmers went out to the plants already by the end of February throughout March. So that was all in favor. And as you could read it, could have read it also in the press and other publications, we needed rain. It was again too dry a little bit for the Q1.
The snow was okay for the ground dryness. But at the end of the Q1 and in particular in April, we were heavily waiting on rain, which finally came by the end of April and now through the month of May. And this is almost on the agribusiness, favorable conditions that we predict now. It's different from what we have seen last year, not only the Q1, but also running through the 1st 6 months, I would already say we are already in the mid of May again. And May is a very critical month for the harvest period coming up.
There's a saying in German language, if it's cold and wet in rain, this is good for the farmer income. You probably know this. I will put it on in German. And this is really what we can see right now. Also, it's raining.
We had a lot of rain over the last couple of days, and it's predicted to be the same weather conditions over the end until the end of May. So that would also be in favor of our agribusiness so far. Looking on the Renewable Energy side, we have pretty much the same start as we had it last year, and it's this is also what we predict for the rest of the year. You know that last year, we had all the incomes coming at the end of the year and the final quarter. That will be quite similar this year again, apart from some projects that we will realize in the Q2.
We sold already 2 projects in April that will come into the account in the second quarter in Australia with quite impressive EBIT contribution. What we saw in the Q1 so far that was an overlap, you might say, from 2018, one portfolio that we could not have been sold in 2018 that went through the books in the beginning of February. So this is the main difference on the RE business. We are on track with all our activities, with all our businesses. And this is quite simple, the summary of the start into the Q1 2019.
Just some additional remarks on the specific entities running into the agribusiness. You'll be just mostly the same page on same picture on Page 7. On the overall market environment, there has not been much fluctuation from what we have told you in the end of March, our endless conference here in Frankfurt. The picture is quite mostly the same. As I said, we are looking on the weather conditions here in our areas.
What we see on the international level is that we still have a higher consumption or the consumption exceeding production. That's the same picture that we showed you 6 weeks ago. Now the estimations coming in for the new harvest on the Northern Hemisphere. The Southern Hemisphere is quite true, the harvest. So the picture has not really changed.
The trade war between China and the U. S, I don't have to comment on this. You can read it every day in the press. That also blocks the market a little bit. So what we are lacking off in our international business is the volatility within the 1st 3 months.
But as our colleagues in Rotterdam stated in our latest past meeting, they expect this will come back because we have quite similar, the same picture on the trading activities as we saw it last year. Finally, demand from the U. S. From the European customers, mainly the European feedstock customers, will come up, and they expect it to be not as tight as it has been within the 1st 3 months throughout Q2 and Q3. So this is the whole market picture, the market sentiment, which has not been really changed to what we have seen in by the end of 2018 and that we reflected on our analyst latest analyst conference.
If you look on Page 8, this is what I meant on the international activities. The bus business is, you might say, pretty much ahead behind last year. But this is mostly a postponing effect, one can say. The only really drop back that we saw was in our UK business due to the mild winter in the U. K, the British farmers the supply for British farmers on feedstuff was weaker than the year before.
That contributed for around SEK 1,000,000 or SEK 1,500,000 on EBIT, which we lost in the Q1. The remaining 2.5 being behind last year's numbers, the last year pretty strong Q1 demand. So the 2.5% behind last year will what we expect and our colleagues in Rotterdam expect being caught up in the upcoming months, mainly starting by the end of May June. So we hope to see as well a little bit of this catching up already in the Q2, but mainly this will come back in the final two quarters of 2019, where we expect a stronger business on the international level. What we will miss for the whole year, and also this is what we reflected in our analyst conference in March, is our Iran business.
You know that we stopped these the activities here, and this is more active today than it was yesterday. If you read the news, this is still the conflict is going on. And the conflict between the U. S. And Iran is getting sharper, as we say.
So we do not see any business aspects coming out from the Iran business. So at least the whole volume of contribution at around $2,000,000 that we expect, but it hasn't been included in our plannings for 2019. That is obviously lost also for this financial year in total. Going to Page 9, and this describes a little bit, and I don't want to repeat everything, the market environment on our Resources Business and Global Produce and Equipment. Resources is quite early to say, but we have a stronger business.
As I said, the it started earlier, and therefore also the demand on fertilizer came in earlier. The demand on crop protection will be supported by the weather conditions that we have right now here. As I said, cold and in particular, wet May, a lot of rain coming in. This is the ground that we need for fertilizer treatment and for crop protection treatment as well. So given the price environment and how we bought in last year, this is also favorable market conditions there.
Global produce, the harvest in the Southern Hemisphere is almost through. It now comes to into an end, and they now start with the marketing season. Therefore, we haven't seen a lot of contribution from the New Zealand business in our numbers within the 1st 3 months. This is the business which is now coming in the 2nd and third quarter so far. Also there, we saw an impact on the harvest that the apples being harvested in New Zealand were somewhat smaller than expected size wise.
This is the point this year. It's always a point every year, as I say, but this year, the quality is quite good. Apart from the size of the apples, they also saw obviously some frost issues in the late of the spring season in New Zealand, which means September, October. And that came only up during the harvest period when they saw that the size of the apples was smaller than expected. That results in less TCEs to be of these traits created equivalents or the cartons of apples to be market.
So that will impact the value the volume on the New Zealand harvest, but we are still confident that we could achieve what we expect from the New Zealand business. All other entities in New Zealand are running on plan or better. Agricultural equipment, yes, the environment, as we described it, it has very the income income development of the farming income last year were good as we described it in the latest analyst conference as well. The farming demand for technical equipment is strong, still strong also after this record year that we saw in 20 18. And now we have within the start a stronger service business, the deliveries of new tractors and new harvest machinery will be the story of the remaining months of 2019.
Looking on the numbers and starting with our traditional agri business, the what we call the German Austrian business, this is the opposite from the international part of the traditional business. And you see there with slight increase in sales, and this sales increase is absolutely only price driven. We had a downturn of some 15% volume wise on crop trading. Overall, that reflected the lower volumes that we got from the harvest last year, and this was completely overcompensated by the price effect. Remember that we have a difference of some €25, €30 per ton in average compared to the 2018 marketing season.
So the higher price effect overcompensated the lower volumes. But nevertheless, it resulted in a drop in results. Remember that we started with a negative very negative soy complex last year with a burden of some €5,000,000 already in the Q1, which was or could be seen as a one timer. But even if you take the one timer out, you see that we had a somewhat stronger marketing season and markets and margins and results on crop trading even with lower volumes. And we saw already a stronger fertilizer business, which is not included here in these EBIT contribution is crop protection.
Crop protection is behind last year. Crop Protection started earlier last year in March. It was a very short treatment season. And then remember, we had a very dry and hot April May also in 2018. And in a follow that crop protection treatments were reduced on the farming sites.
This is a complete different picture now in 2019. And this is not yet reflected nor in bonus wise or no in the result wise in this Q1 result, this is the business of the 2nd quarter, as you all know and are aware of. Looking on Page 11. This is the starting number or the starting result for our global produce business. As I said, could be compared to our Q3 in our agribusiness.
This is the harvesting season, not a lot of EBIT contribution to be expected within the Q1 from the Southern Hemisphere. Picking up on the German business from the marketing season, which is still running and comes to an end now. And now starting with the marketing season on the New Zealand Apple business, result wise, we picked somewhat up, but this is not the picture for the whole year. The contributions are to be expected in the upcoming quarters as well. With a look on the Agricultural Equipment, it's pretty much the same.
It's a breakeven business, which is good for the Agricultural Equipment where we normally have 2 cost months with January February having a little bit of service business. Service business has been stronger than the year before. But again, also here within the technical equipment business, the environment is good, the sentiment is good, the farmers' mood is getting better. We just had a meeting with representatives from the farming business last week, and they also stated that immediately with the upcoming rainfall here in our areas, and this means in Germany, South Germany and Austria, the mood of the farming sector, the mood of the farmers turns again, and they are happy now. And I think this will also support our equipment business for the rest of the year.
Summarize all these on Page 13 on the result numbers. Once again, you see it has been a pretty good start compared to the previous 1st quarters. We also had other numbers in here, but it's an average one. And therefore, I would say it's a good start. It's a good basis for the next three quarters to come.
But once again, that has just been the Q1. I look on energy. Energy on Page 15, the environment unchanged also, as I said, for the Renewable Energy sector, still a booming market, still a strong demand coming from all parts of the world on the international market, if it's, say, it's Australia, I would say, it's the Asian market, our portfolio in the Netherlands supporting business and will drive business also in 2019 very strongly and also from the U. S. Market.
So still unchanged there. On the conventional energy side, you see the prices made coming up from the end of 2018 with a peak in November and then reducing down. That really did not influence demand and did not really influence the margins, as you will see on the results numbers. And if I turn over to Page 17 first, because this and the flow now, looking on the conventional energy, you see a really strong drop in results for the 1st 3 months from an EBIT wise 1.6 to 5.7. This is and remember, we also reported a record high for the 12 months period in 2018.
So this continues already in 20 19 with the 1st 3 months, the winter months, the stronger months, that will also continue through April. It's now getting of course, we are starting into the summer period here, hopefully, in Germany and Austria. It now reduced a little bit, but this is still a very good starting base, also for a record high or good result for 2019 full year again. Going back on Page 16 with the Renewable, this is the mostly, as I said, the overlapping effect from 2018, which is the biomethane portfolio where we got the antitrust agreement or the antitrust approval only in beginning of February instead of what was expected at the end of December. So this was the only postponing project from 2018 that came in now in 20 19 already.
The higher contributions, as I mentioned also in my opening statement, should be expected within the second quarter with the Australian project and then finally in Q3 and again in Q4. But it will not be a hazard as we saw it in 2018 with the magic 27 December. The story will be somewhat different over the year in renewable energy. Nevertheless, we stick to what we said on the overall expectations for the both conventional and renewable energy sector. Page 18, the summary also there with yes, without a higher meaning.
Once again, you see in Q1 2016 2017, we had higher impacts already from the Renewable Energy business. You see the business in the big term to last year's Q1. So we are on track, and the main part is the seasonal business on the conventional business, which have the very good start into 2019. Building Materials, finally. Again, if you remember Building Materials, this is there's also a saying within BAIVA, the Building Materials business only starts after Easter.
The Easter holidays this year have been only in April. But nevertheless, this business has been picking up mid February, again, after the winter period. We are on track. If you look on Page 21, market conditions on Page 20 are unchanged to what we reported. On Page 21.
It's mainly the same picture of last year. And once again, Building Materials business is Q2 and Q3 business. And overall, if we achieve the respective sales numbers with the bonus impact that comes in only in Q4 then, but you know that we always expect a somewhat €30,000,000 EBIT contribution from the Building Materials business. I think we are on track on this path. Finally, yes, a word on innovation, digitalization, nothing to be mentioned to what we reported so far.
Therefore, I think I could drop over to the other activities you see on Page 25. This is the cost center activities, you might say, and you see an increase in result from minus 16% on the Q1 2018 to a minus 9%. Minus 9% is reflective of what we expected on the overall level, I would say, 35% to 40%, maybe a little bit below that number. In this year, we had an impact on this IFRS 16 on the EBIT number that reduced no, that was positive EBIT effect of some SEK 3,000,000 and this will be an impact quarter wise, SEK 3,000,000 at least comes up to some SEK 10,000,000 to SEK 12,000,000 for the 12 month period. This has been reflected here in this minus €9,000,000 And another effect was the sale of the our participation, we probably read the news on our what was it, a 49% or 50% share on company called Kartoffel Centrum Bayern that we held together with our colleagues from the RWZ in Cologne, and the Cologne guys were running this is processing business.
They were running this business, and they took over this share, which is of no strategic importance for our company since we left all processing activities that was in contribution of some about SEK 4,000,000 coming in here in the Q1. It's part of our strategic portfolio cleaning, where we saw this is the first thing that we saw, but you heard about some announcement that we made in between, and this will continue throughout 2019. So this had been the first catch, a smaller one with an EBIT contribution of some EUR 4,000,000 in other activities. So yes, I don't want to spend much time on the summaries here for the income statement. As I said and repeat me again, it's not the picture that we expect for the whole year.
It's the starting quarter. Once again, it has been a positive one compared to last year and an average one in the historical lines. I think it's a good basis for 2019 business. One picture on the balance sheet where we now see the on the Q1 numbers and the full year numbers, and strong increase on the total assets number, which has been reflected by 2 aspects. The first one is the inclusion of the IFRS 16 leasing commitments now in our assets and in our liability side, which has been reflected by some an increase of some 600,000,000, somewhat, euros euros as we expected it.
This will be part of our balance sheet picture for the future as it will be in all IFS consolidated companies. And the other one is a seasonal one. This is the increase of the current assets within the inventories, mainly reflected by a stronger RE business, but also by a higher that has been reflected in the result numbers for the Q1 business by the end of March, reflecting higher outstanding receivables. This is a thing that only comes up by the end of the quarter and which will be released in the upcoming months accordingly. I think this is the only important thing.
What we report now in future on the balance sheet is the long term against the CI, that means the Credit Institute, this is what we had as a debt position in our balance sheet in prior periods as well. And then we have the results there included in the leasing liabilities that you can see what the impact was on the long term leasing liabilities. We had some SEK 160,000,000 so far already in 2018, and that was now brought up to some SEK 770,000,000. I think it's compared to other companies, probably an average or even a lower number if think on high asset high rented companies like Lufthansa or whoever, probably have a totally different picture on that side. So this is the lease issue.
The operational outlook, and that should conclude now the my statement. I made already the most important statements. I think for the agriculture, it's a good environment. The start was good. The environment that we see on the harvest, which you know that we're always talking about the 2 sides of the business, the spring business, the resource business, and then we have the upcoming harvest business.
But if the string business is not good, so that's not a good basis for the harvest business as well. We have enough from the conditioner wise weather, water conditions here in our area. So that should be a good environment so far. The international business, as I said, is expecting to picking up. The market season for New Zealand products just started now.
So we are confident that we could stick with our plans, and the basis is quite good. The start was quite good. So nothing to say on the Agri business. The same on the Energy side. The start was surprisingly good.
Should be seen as a good basis also for the rest of the year. The environment will stay the same. We are now expecting a slightly downturn on demand for heating oil, of course, through the summer months, which will pick up traditionally end of August into the autumn and winter season again. Renewable energy, I could only say everything is on track. A lot of and you see it on the next page, where the impact will come out from some 660 megawatts to be on the table to be sold in 2019 compared to 450 last year.
Everything is on track. We have no other informations or no other signals from our project managers so far. Australia, the 14.4 megawatt will come now in the Q2. They have already been through. Yes, on Building Materials, this is, as I said, a stable business year on year.
The expectations I mentioned already is some €30,000,000 contribution for the overall. And I think this will also be the environment stays strong in our areas, and there's nothing to be to worry about. And I think this is also a good fundamental for the whole year of 2019. That should be it. Once again, a good start into 2019, surprisingly good on the conventional energy, but also a good environment on the agribusiness again compared to last year.
We should expect and we could expect, if we think on the total outcome from the agribusiness of €5,000,000 only EBIT contribution last year for the full year, that should be sharp increase being expected on the agribusiness for 2019, Renewable on track, Building Materials on track. Yes, and I think that should be it. I hand over again to Josko, and then we're happy to take your questions if there are any.
Yes. Thank you very much, Mr. Helber. As Mr. Helber stated at the beginning of the presentation, the Q1 is, to a certain extent, limited for us.
And we met recently a month ago for the analyst conference. So I don't expect too many questions, but please feel free to ask now.
There's still anyone on the line?
There's 22 people on We will now take our first question from Anae Margaret Crowe from Edison Group.
Good morning. Thank you for taking my question. You noted that last year there was a recovery in grain trading later in the year that was driven by demand from seed producers. Now thinking back, these will have benefited from the long dry summer and the lack of forage, which obliged farmers to buy more feed than usual. But this year, we've had rain in April May, which is good.
And this suggests that farmers will be able to feed their animals on grass and silage and other farm produced material, reducing the demand for brought in feed. That being the case, I was wondering what was behind your confidence that there would be an upturn in grain trading later this year?
Yes. Sorry. Thank you for your question. Very interesting one. What we expect is, firstly, what should say, what we deliver into the feed sector, mainly on this international business, is proteins, is what we call the specialties business, and it's not the mass product that the farmers have on their own plants.
So the demand that is coming up, this is more the soy complex coming from South America. Firstly, and it's the protein and the specialty business. So the impact that we expect and that only they saw last year, an impact of some $8,000,000 that will be driven up to some $12,000,000 to $15,000,000 maybe for the full year in 2019, that's mainly the specialties business. Then second thing is that we will probably benefit from is remember, I don't know if you remember on our full year's conference, we reported that this entity, the international trading entity benefited from the trade war between China and U. S.
In a certain extent. And this certain extent meant that we brought crop that was delivered not longer from the U. S. Into China, but was flowing from the U. S.
Into South America, through South America and Europe into China. That was a part of our business that we executed last year. And having still the same environment on this trade war issue, we still strongly believe that this will support demand for the upcoming months.
Right. That's really helpful. Thank you very much.
Pleasure.
Thank you so much. We now take our next question from Christian Bruns from Pareto.
Yes. Hello. I have two questions. The first one would be to have an update on the process of looking for a partner for your renewable energy business, if you can say something on this process? And the second question would be on current assets.
I mean, it's clear that your asset base is increasing by IFRS 16, but the current assets also went up. And could you give us some indication in which divisions the working capital was rising?
Yes. Thank you, Mr. Roentes. First on the RE project that we announced and that was I kept it out of the presentation because there is currently nothing new to be mentioned so far. I could only give you the process the project name.
The project is called internally Emerald, yes. But this is not the only effort we made, of course. We are preparing everything on that after being public sorry, after being public with the news, we saw a lot of interest coming in on both parties on BNP Paribas, but also on our own address. So what we are currently doing is preparing the data room, preparing the vendor due diligence. We are very, very confident that we will be successful with this project.
I think this is a good environment and the interest being brought up by 3rd parties shows us that or reflects us that it's a good time frame, a good window frame for this project. But as we said, the next process steps should be by the end of May being ready with the data room for reviews by 3rd parties, and then we have the teaser, and we have the market approach, and that will only start by the end of March, the beginning of June. Maybe we have further information on the Q2 conference call, But nevertheless, if there is something new, we will inform you also in between. So far on the RE capital increase process? The second question was on the current assets.
It's you might say it's half and half driven by the activation of costs on the RE project side. Some I look at my finance guys here, some EUR 250,000,000 to EUR 300,000,000 I would expect from the RE business and the remaining is stronger accounting or receivable business, invoice business from mainly the conventional energy, but also building materials and agriculture. It goes through all the entities, but with the main focus on the conventional energy. If you look on the EBIT result, they had a very strong business by the end of and they then they put the invoices out and they account for by the end of the quarter. This will come back in April already.
It's mainly in invoices.
Yes, okay.
It's very, very low impact is the what we call the late collecting business from the farmers. I just checked the inventory levels year on year on grain. They are mostly in line with what we saw last year. So there was not a particularly stronger business on inventory side that drove the current assets. That's mainly the short term account receivable and the activation of the capitalization of costs on projects in the RE business.
Okay. Thank you.
Thank you, sir. We do not have any further questions at this time.
Okay. So it seems that my assumption was right.
You forced them, not to put any further questions, but I think No.
In any case, thank you very much for your participation. The next conference call will be on the 8th of August. Until then, we wish you a nice summer, a little bit rain for our region here. And also thank you for
participation. If we have further news on the other issues, as I mentioned on Mr. Plun's question, we will, of course, come up with news flow to you. Thank you so far, also from my side. And yes, goodbye.
Have a
nice evening.
Goodbye. Thanks.
Thank you, sir. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.