© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you. A nice morning and would like to welcome you again to BayWa's conference call on the result of the first quarter 2023. You are probably aware that the changes within BayWa's Management Board took place and are effective at 1st of April this year, meaning Dr. Marlen Wienert appointed as a new Board member and responsible for the Equipment segment and input Business within the agri sector; and Marcus Pollinger, who is sitting next to me, the successor of Professor Lutz and takes over the role as BayWa's new CEO. I wish both of them all the best and, of course, much success for the future.
Today, Mr. Pollinger will guide you together with Mr. Helber, our CFO, through the presentation, and we'll be happy to answer your question at the end of the presentation. All relevant documents for this call have been sent out this morning, and of course, can be downloaded from BayWa's IR website. I hand over now to Mr. Pollinger.
Good morning, everybody, and welcome to BayWa's conference call. Unfortunately, we can't look each other in the eye this time, but I'm looking very much forward to meeting every one of you at our Capital Market Day. And I have met some of you last time when we had our meeting here in Munich. Before I talk about the business development of the first quarter, I would like to say a few words to you in my new role as CEO.
Personally, I'm with BayWa for the last 15 years. And my family roots back into the Agri Trade business. My great grandfather founded our company in 1924, so 1 year after BayWa and I grew up between fertilizer and grain. So you can imagine that I'm very passionate about my new role and about BayWa as a group. I'm looking forward to the challenges in the newly formed Executive Board team, Dr. Wienert; and my colleagues, Mr. Helber and Mr. [ Wolfin ], please bear in mind that it was my decision to put Dr. Wienert into the Executive Board, and I'm very happy that the Supervisory Board agreed to that. I'm working with Andreas Helber for the last 15 years and with Dr. Wienert for the last 5 years since 2019. So as a team, we are very well set.
What can you expect from us? We had the first joint strategy retreat fortnight ago in [Betas Garden] with the new team. The outcome from the 2 days can be summarized as follows: There are no fireworks or any revolutionary innovations with regards to our strategy. The strategy cornerstones that we decided under the chairmanship of Professor Lutz remain in place.
What does that mean in concrete terms? The growth markets for BayWa are international agricultural trade and renewable energies. The focus remains on expanding the specialty business in Germany and abroad. There's a need for restructuring, of course, our domestic business in the agricultural department when it comes to input. This is an ongoing process, and we are on a very good path here. Here we need to optimize the infrastructure because we have to adapt our infrastructure to the developing market of the farmers. The growth momentum in the renewable energy sector is undisputed. The planned sales of the Solar Trade is a measure to drive growth in this segment.
We made a decision to sell the Solar Trade in order to strengthen the IPP and project business and to create a stand-alone finance structure for this area. Or as my agri colleagues would put it, we are cutting shoots to be able to grow further. And let me say right up front. Building material remains, of course, core business. There are no plans for regional expansion, but I see good opportunities to drive the construction business forward through vertical integration as we have already proven in the past in our core region, reducing construction costs by increasing efficiency is the lever for us and our customer.
In concrete terms, this means shifting part of the value change from the construction side to the production hole, as we can be seen in examples of TCO, the bathroom manufacturer close to Rosenheim, where we are building in an industry hall wooden bathroom. These are the future potentials in the construction industry in which we will participate. I don't want to go too far now, but I would like to present these topics as at this year's Capital Market Day and discuss them with you all. The main focus for the current financial year is the sale of Solar Trade achieving the earnings, of course -- achieving the earnings targets of the group of EUR 320 million to EUR 370 million. In the current market environment, this is not a foregone conclusion, but the first quarter of 2023 forms a good basis for achieving these goals. This is a nice transition to look now at the Q1 figures. It is great to see us get off to such a strong start this year.
Let me start with the first slide on your presentation the highlights. First of all, of course, a very strong start to this year. The 2022 harvest and still high price level in our agricultural equipment. Please bear in mind that in this Q1, there is not 1 single renewable energy project sold. The EBIT decline versus the full year is, of course, the very strong first quarter in 2022, boosted by dynamic market developments, volume price inducted decreases in heat energy and carriers. So we do see a decline in these prices in 2023.
And of course, a very unfortunate occasion, which hit us in New Zealand is a cyclone, the tropical storm in New Zealand, which destroyed up to 25% of our harvest area of our orchards. But we are very, very positive that we will see an outcome of this situation in the next couple of weeks when it comes to the insurance claims, and the strong domestic business and the new [packhouse], which was fortunately not damaged, give us good hope for a reasonable result at global produce. The most important thing in this year, of course, is the sale of the international business entity Solar Trade, which is even in the Q1 performing extremely good.
On the next slide, you see a multiyear comparison of our EBIT, and this is what I mentioned before. I'm very happy that we've seen such a strong start into this new year. Now let me give you a deep dive of the market developments. And the energy sector, first of all, the most important thing, how -- which markets are we expecting in the upcoming years. The global capacity installation forecast by reaching is extremely positive for the wind and the solar business and does match perfectly to our business plan.
Let's have a look on the results of the Renewable Energy segment. As I mentioned before, bear in mind, there is not 1 single project sold in Q1. And for the first time, I think this underlines the strategy, the IPP business outperforms every other business in the group.
Let's go to our Energy segment in the BayWa AG or BayWa Group. Of course, you see a decline in EBIT due to the fall in prices in the heating mark and the LNG business.
Next slide. please join me at the agriculture business. First of all, you see, of course, the development of the price trend of wheat and rapeseed over the last 2 years, '21, 2022, of course, you can see the steep increase in prices due to the situation in Ukraine. We were very [indiscernible] and I'm very proud of the new trading team in Munich. We were very well positioned and we participate to this day of the very well-positioned trading team of our business in Munich, in Hamburg and of course, in Rotterdam [indiscernible] . The global train balance, you are -- when you joined BayWa for a couple of years, you're very well familiar with that. It's still tight. So the market or the forecast for the harvest in Germany. It's very close to the year before. So we are still in a tight market, which makes our products very interesting. And bear in mind, in the south of Germany, there's not a single other trader who can provide the amount of goods needed by the mills, oil mills and feed production as we can.
Take another look at the agriculture business market development inputs on the next slide. You see that, of course, the crop protection and seed is delayed due to the weather. We didn't have very good weather in the first quarter. So to give you a flavor normal just for the AG, we sold up to 300,000 tons of fertilizer till the end of March. We are now -- we have now sold up to 210,000 to [90,000 ] of which is to be sold in the next couple of months. The very, very positive business, and I'm very proud of the team, is the agricultural equipment business. We had some problem with disruption in the supply chain of -- and to get -- to put it easily to get the tractors on our slots to make them ready sale, we could sell more tractors than we actually get. But the team is doing a very, very good job. And bear in mind with all the new regulations for green, green deal and the other things, you do need the mechanical instruments to and equipment to work without or to be on the field, in the field and producing with less inputs.
The Fruit business, as I mentioned before, the German Fruit business, as you know, is doing quite well. I'm quite pleased with this business. The TFC business, our business in the Netherlands, where we import up to 200 different exotic fruits is, of course, due to the situation in the retail a bit under pressure, but we do think that in the next couple of months, we can see a silver lining in this business as well. And as I mentioned before, the new Zealand business is -- the harvest is now close to this end is getting -- sorry some technical equipment. Thank you.
The New Zealand apple harbor is -- shows good results. We're very pleased with that. We do have been hit by this tropical storm, which means that 25% of our orchards will be replanted gives us the chance to replant them with new varieties with our new project, [indiscernible] our new apples like [indiscernible].
Going to the next slide to Cefetra Group Limited. You can see that the EBIT is even to last year, this is 2 main points to be mentioned here. First of all, excellent trading, an excellent execution is not only the trading, it's the excellent execution, which is very important in this business is working out perfectly fine in Cefetra and the new specialty business. where we do trade all kind of other specialties except cereal and grain in this business like starch is doing very, very well. So this is for me a very good sign that the strategy, Cefetra Group is pursuing is paying off now and it was the right way to go.
The result on the next page of the Agri Trade & Service segment in Europe shows an increase in revenues due to higher prices of the product. And of course, a lower Q1 EBIT, but still a very, very good one beyond [indiscernible], and I'm very, very happy, and it shows that the strategy is going is working very well in this business. Agriculture Equipment segment, as I just mentioned, due to price induced gross revenue and profit new machinery sales are up the roof. It's just wonderful to see, and it's incredible, even in Canada and South Africa, business is doing very, very well, and all our branches are operating very, very successfully. Happy to see that global produce segment, as I mentioned before, of course, we do see now this negative result due to all the indicators I just mentioned, but we are quite sure that we will get these results into a much better looking figure in the upcoming months. So there will be no problem in this segment.
Building materials, as I just mentioned, building material always a very slow start. What is maybe interesting is that we, as you know, have founded a couple of years ago, the BayWa project company, where we are building our own apartments and houses and sell them, and this is up to EUR 10 million EBIT contributor. So even though the markets are slowing down in the building material, we are -- we are expecting to see the building materials business on budget. And please bear in mind, there will be no carbon emission reduction in Europe and not in our market without a -- highly invest in building materials when it comes to efficiency for warms and heating.
I'm very happy to hand over to my colleague, Andreas, Head of the group financials and I see you guys later for the Q&A.
Yes. Thank you, Marcus, and good morning, everybody, also from my side. We have to switch to Josko's mobile phone here because this is our -- our way how we communicate with you this morning. Starting with the group financial, I think not many words to say the first quarter and as we always indicated, in previous year. This has a minor importance at all, but the start is good, and this is a reasonable -- as Marcus said, a reasonable basis for the quarters to come.
Overall, if we continue with the other activities on Slide 23. It's more or less from the cost side in line, a bit lower than the year before. I know that you are always addressing the full year number for the other activities, which was roughly EUR 103 million the year before. If we expect that the EUR 13 million, there might be some impacts coming in with [ EUR 24 million ] that comes in the range of [ 80 ]. This is what I would expect for the full year, just to give you the flavor maybe a bit higher whatever it comes. But for the first -- in the first quarter, we had a good inclusion of results from Austria juice. This is our in Austria in RWA included company of participation with AGRANA in the 2 sector, they are delivering good results this year, which was not the case 2 years before and some proceeds from real estate.
If we go into the summary of the income statement for the business divisions I think that summarizes all that Marcus brought before you here. And the -- on the energy side, you see the contribution, both entities, both segments the classical energy and the renewables together and to make this very clear. Once again, the contribution within the renewable Marcus pointed that out, it was only from the IPP business, which contributed some EUR 40 million and a very strong Solar Trade business in the first quarter that contributed another EUR 23 million , and that was brought down by some costs for the other entities to the inclusion of EUR 53 million for the first quarter. So project sales will come. That will come in the second, third quarter and of course, at the end of the year, but also important for us is that we go along with a very strong Solar Trade business. You can imagine it, this contribution is very important for the sale process. So we are strongly looking on the performance also of Solar Trade, which is looking quite good and was very strong momentum already in Q1.
Overall, what we see on all entities, and that is also valid for the whole group is that we have a very strong focus on the capital employed and which comes along with the higher interest cost this year. So this will stay in the focus. And you see it also if you look on the business entity summaries that even we have maybe also higher EBIT than 2021. 2022 is not the year I compare to because you have seen it on the first slide, and we indicated that before that the fact that we started with a positive quarter, which was not quite normal, and we saw it on multi year comparison. But for this year, we have to compare against 2021. And there, in particular, with the strongly lower financing and interest costs that we have seen there. This is something what we have to look at very carefully for the rest of the year that comes along with the reduced working capital and capital employed. It will naturally being reduced from -- in Q3 and Q4 from the lower price that we see on the agricultural commodity segment.
And then you see the -- for the summary for the agriculture business as well, starting with the positive results, the building materials traditionally being a negative across quarter. This also has also been the year before or the years before. But if you also look on the building materials performance in a multiyear comparison, it looks quite good for the first quarter. We will see what the remaining 3 will bring in.
The summary on 27, that indicates what I stated at -- we have to carefully look on the EBT, the interest cost that brings the EBT down to EUR 14 million, which is still a positive result for the first quarter. Quite good. But of course, comes along with a double, I guess, it's nearly double the interest cost for the first quarter comparing now that the high interest cost that we have now to the very low that we had the year before that would also be rebalanced over the remaining quarters.
When look on the balance sheet, and that should be it, an increase of the total assets seasonal taken, and this is mostly and mainly the shift of inventories into receivables from the crop side the higher contracted prices went out, brought a very good result for the agricultural trading business in the Q1 into the books. And this will also continue. It's a little bit slowed down compared to the years before. This will also continue into Q2 until the end of June when the harvest -- the old harvest of '22 will come.
The current price scenario, we are down at EUR 225 per ton of wheat again compared to [ EUR 353.80 ] the year before the -- for the half of '22, that indicates you how we're looking on the working capital. But also, this is a quite good scenario for us when it comes into the new crop harvesting season. So that is what we are looking at. That should be it. I guess it's, again, the first quarter, not dramatically changes also on the balance sheet side. And I hand over again to whom I don't know to Josko, I guess, and we are then happy to take your questions.
Thank you, Mr. Pollinger and Mr. Helber. Now we'll be ready to take questions.
The first question comes from the line of Dr. Norbert Kalliwoda calling from Dr. Kalliwoda Research.
Good morning, and much success for you, Mr. Pollinger. And yes, my first question is regarding CapEx and working capital, you explained that. Have you -- some details about the current figures of maybe April or what do you expect in regards of capital -- working capital and CapEx. So did I understand it in the right way that you like to reduce that for 2023. And my second question is what we can expect for the tax rate, if it remains the same as like in the last year. And yes, at the Capital Markets Day, the last, you said you are top 3 player in the solar distributors in the U.S.A. And can you tell us who is #1 and 2.
Yes, Dr. Kalliwoda, I would take your questions on the financial aspects on the working capital and the CapEx you asked. So from the working capital side, what I expect not having all the figures ready for April so far. And this is not a monthly view on assets goal comes along with quarters. But what we have seen last year was an increase on working capital, in particular on the agriculture business due to the higher crop prices that brought up the working capital by some EUR 600 million. And this is what I expect to be decreased in the second half of the year. That will flow out. This is what we are currently seeing. It's a little bit slower than the years before, as I indicated. So the mills are still waiting in ordering the sold crop from market.
Remember, it's already sold, but it's -- to ask it delivered now or another fortnight ago, but that will at least be out, I expect at the end of the second quarter. We just had our business review a couple of days ago and I asked the -- our test trader if we expect to get with higher crop inventory in the new house in season, and this is what he says is probably -- so 1 can expect the EUR 600 million, EUR 700 million being reduced on the agri sector after Q3. And then we -- after Q2, sorry. And then we have to look at Q3 and Q4 on the pricing situation, what the new crop will mean for the working capital level. This is the one thing.
The others remain quite stable. I expect somewhat reduced levels maybe by EUR 100 million to EUR 150 million or EUR 100 million, at least up to EUR 100 million only. Within the building materials sector, if the economy will further slowdown, we have the first indications now seen in April. And this could be weather effective, but that could also be the first signal of the weaker development within the building material construction, which is in our plans already reflected on the EUR 320 million to EUR 370 million guidance that we gave. So these are the most -- the main 2 trigger on inventory.
I do not expect strictly lower level on -- within the agricultural equipment, which is a very strong performing and we went into the new year with the highest order intake ever and you saw the results on the first quarter in the presentation. So I think the main impact will come from agriculture, crop commodities.
CapEx will remain more or less stable. We are -- we do not reduce anything on CapEx. But as we said, we are already on a normal level there. And the next question was on the tax rate. We expect the normal one with some 28% -- 27%, 28%, which is the normal average tax rate. We have no indications that we have something to correct on that? And what was the last question?
The last question, third question. I would take Dr. Kalliwoda who is the largest distributor of solar equipment and installation supplies in the U.S. So it is the #1 is a CED Greentech company based in San Diego, California. Number 2 is Fortune Energy based in West Sacramento and the number -- third, as we mentioned on the Capital Markets Day BayWa R.E. Solar Systems, LLC. So this is the situation in the U.S.
The next question comes from the line of Markus Mayer calling from Baader-Helvea.
Also 3 questions from my side. First of all is a question on the potential subsidized industrial power price, which was in the press basically since last week. How do you expect will this potentially subsidize industrial power price, which is rumored to be at $0.06 per kilowatt-hour affect your Energy business? That is my first question.
Second question is on the fertilizer trading business. I would expect that the lost volumes there. Will they be caught up in the remaining quarters of the year? As the fertilizer prices have fallen significantly to see a better demand in the second quarter or maybe also indication for a third. I know second quarter is not that important, but nevertheless, in a seasonal picture if you see a better demand there? And then the last question would be on the mentioned financial costs, interest costs. Besides this divestment, do you see any potential measures to reduce your interest costs? Are there any kind of ideas how do you reduce them with green bonds or whatever kind of measures, which have a lower interest rate than the market currently?
Okay. Thank you so much for the question. I will start with your second question concerning fertilizer business. Well, first of all, we're very well positioned. So we didn't have too much of fertilizer in our own stock or in our own books. So the decline in price didn't affect us. The team has done a great job here. Your question, if we catch -- we are able to catch up the 80,000 tons, we haven't delivered yet. I hope so. If everything went very well, we will be able to catch it up. But bear in mind, it's end of April now, we did already catch up a significant amount. But I'm optimistic that we can catch that, but I'm not -- I can't -- can't be too sure about it because sometimes if the farmers miss one applies, they won't do it again. Maybe, Andreas, on the third question.
Yes. On the potential measures to reduce interest costs, as I said, the crucial question that drives us all here. On the mid-term and long-term run, I see, of course, the sale of the Solar Trade that would from the proceed that we expect. I'm not repeating my expectation, what we get in because I'm going to be plan for my colleague Matthias Taft then again. But you know what we are expecting. This is the EUR 1 billion deal, whatever it will come out. So that will have the most impact on reducing the debt level and the incurred interest cost.
The second measure would be, of course, reducing working capital. I elaborate on this one on the agricultural equipment, my expectations on there. The third one, what you mentioned, we see -- as a instruments on the capital market which are aligned to reduce interest costs. I would be very happy if you could indicate them to me, there are known. Everything that you can put on the capital market now is much more expensive than it was in the years before. So the focus must -- most lie on the asset sale on Solar Trade and the trade on solar -- sorry, the sale of Solar Trade and the reduction of the working capital.
And the first question, when it comes to energy prices, as BayWa is not into production or manufacturing. We are not an energy-intense company, so this won't affect us.
No, the question, maybe I wasn't clear with my question, but the question was more if -- do you expect an indirect effect on your Energy business because I guess for a part of the industry, there will be a subsidized power price, then this will also change the supply/demand situation of the energy industry in Germany, at least. And as such, there might be a negative effect on the Energy business or even a positive effect if you also provide then businesses to energy-intensive businesses like the chemicals or steel industry. So therefore, I was wondering if there any kind of direct indirect effects?
We don't see currently any of these effects. We do supply, for example, direct energy to the Schaeffler Group, where we just built a solar plant in front of the factory, which gives directly the energy goes directly into the company with a fixed price. So I don't see any direct effect on this -- to the business.
The next question comes from the line of Sven Sauer calling from Kepler Cheuvreux.
I have only one question left. And my apologies if you already mentioned this in the call. But you mentioned that in the agricultural equipment segment, you have a record high order book or order backlog. But then again, you're kind of warning that the market momentum could slow in the second half of the year, which basically we will enter in 6 or 7 weeks. So I'm wondering what the reason for that is it seasonal effects? Or do you see a structural decline in demand?
We don't see a decline. It's more a seasonal effect. And you have to bear in mind that we're still waiting for sub tractors to hit our slots and the great figures of the Q1 results are the backlog of 2022. So as I mentioned before, if the new technology or a future farmer needs a lot of technology because as less inputs as you're putting onto your field, the more you need tractors and special machinery. So I do see a -- I'm very optimistic for this business.
The next question comes from the line of Oliver Schwarz calling from Warburg Research.
Off to a good start, Mr. Pollinger. Hopefully, this trend continues. So congratulations on that.
Thank you.
First question that I have is in regards to the Renewable Energies business on page slide of your current presentation, you stated that you're planning for approximately 800 megawatts of solar and wind projects to be sold externally in 2023. When compared that the Q4 2022 presentation that was stated that the project business should be in the vicinity of 2.1 gigawatts, including the IPP business in 2023, deducting 500 megawatts for the IPP business, which was highlighted. I would come up with a number of 1.6 gigawatts. So basically double of that, what is now in the Q1 presentation. What am I missing here?
Mr. Schwarz, I'm just checking the number because I'm not familiar with the figure mentioned in the last call. I'm sorry.
I think you are missing nothing. It's probably the actualized change of what they have, the 2 point -- the 2 gigawatt in overall total production, which will -- and then what goes out is the external [ 1,800 ] , and the remainder is what we expect to be put into the IPP that might change from quarter-to-quarter, of course.
Yes. But basically, that's fine with me that this is a moving target. But nevertheless, let's say, that would imply if we keep on heading for the 2 gigawatts in total external and external product business in 2023, that would give us, let's say, 1.2 gigawatts in additional IPPs. So basically, the 2 gigawatt target in IPP that was slated for 2024 would already been reached in the current year? Would that be a fair assessment?
Here comes the expert. Wait.
Out of this 1.2 gigawatt, I think 600, 700 megawatts will be transferred into the IPP sector but will not be finalist. They will not be in charge at this moment.
May I correct, you're not 1.2, but 2.1.
2.1 Is the total number, including the external sales and the internal movement of the IPP sector. 800 megawatts are the projects that will be sold to external company.
Basically, strictly mathematically speaking, what imply 1.3 gigawatts for the IPP?
Yes, 1.2 to 1.3 gigawatts. Yes, I know.
Yes. Okay. And the 600 would be strict the project in project Phase 1 to 4 somewhere, I guess, and the rest would be finalized projects. Is that correct? Okay. Okay. Right. Got it.
We can double check again. Of course, and we can pull you back. But in general, it's correct.
Okay. Wonderful. Second question would be on the new hybrid bond. Mr. Helber, could you quickly put some flesh to the bone here. So basically, what your thoughts are in regards to volume. What this vehicle is meant to basically bring to the table in regards to BayWa's balance sheet, whether you will be willing to do more, let's say, equity related, let's say, the emission of any additional equity-related vehicle, whether you are fine with the EUR 100 million. Basically, that is a substitution against to the old hybrid bond that you paid back last year, but that was a volume of EUR 300 million. Now we are talking about a volume of EUR 100 million. Could you just quickly talk us through your thought process that led to basically the new hybrid bond. That would be wonderful.
For the question. I did not expect the question from you, at least, I must say. Because honestly spoken, I must say, I was not very happy with the transaction that came through, I must say. When we spoke about the markets with our banks over the last couple of months, and we also spoke to Warburg. And we -- Warburg came up and said, okay, what we can do for you. You know that we had to repay our hybrid last year, which we did not extend before the market conditions that we faced in this period. So the market -- the old hybrid was priced to occur with a [ 4.18 ], I guess, which was a favorable condition. But then when it came to the due date as of Q4 perspective, it went up and sometimes -- someday, we went up to a 2-digit number, which made it absolutely unattractive to replace it by a new one, and we repaid it.
Nevertheless, we looked on the overall situation and also Warburg came up with it and say, what we can do is a kind of try replacement with some whatever [where is your family] or [we are the] bond traders. And he was not very keen on doing such a public placement as it turned out to be now at the end. Volume-wise, it would have been quite easy to place a bond of some EUR 300 million. That was the market feedback. We've got very good market feedback, but of course, not on a condition that we went out with.
And if you look on the risk which is lying on this hybrid bond and compared to the transaction 5 years ago. This is the same one more or less, given or taking into consideration the increased basic interest. So the transaction was quite good. Volume-wise, if you would have gone up to EUR 300 million, that would probably not be in with an 8% or 9% or in the range of 9%, lower than what they indicated to have last year. But -- of course, nothing that I would go for giving the very high cost of it.
The volume of EUR 100 million, was that [those or] what we also indicated with Warburg, it was very simply simple rationale behind. Over the years, and you know that Mr. Schwarz, we lost some EUR 300 million on equity on the decrease of the interest rate on the pension liability that has been reversed now over the last 2 years by some EUR 150 million, EUR 160 million up to EUR 200 million in the range, and that will further continue. And what I said, okay, we covered that equity more or less over the years, but there was a remaining portion of some roughly EUR 100 million. And that was the idea behind it going for volume on equity on a hybrid of up to EUR 200 million.
It turned out that the ticket size at the end of the day was for many investors too small -- so that was -- and once again, I'm happy with the transaction as I reverse now how it came through. I was not planned to get over the EUR 100 million. And as it came to the end of the transaction, the feedback was very good. We could have done more. I would not have done it before because of the higher cost of the hybrid instruments. I'm happy with the development of the equity. We will see a reduction of the overall assets in '23 already. And then we will see the huge impact on the equity coming from the sale of the Solar Trade transaction or the Solar Trade business. So there are no plans for further increases of further capital or equity transact right now in the light of what we see to come.
So for you not being, let's say, okay with how the process was managed I also part of the process I have to confess, so it could have been worse. But just looking from a fiber balance view. When you -- the emission of the last EUR 300 million hybrid bond was in 2019, you had a balance sheet total of EUR 8.9 billion, net debt on adjusted of EUR 3 billion. And so you increased your or hyped up your equity ratio by the ambition of that EUR 300 million hybrid.
Now -- looking from the 2022 perspective, balance sheet total is EUR 13 billion. Net debt is in the vicinity of, again, unadjusted EUR 5 billion and you're doing a EUR 100 million hybrid bond to replace the old one. So basically, the question here is, why not more than EUR 300 billion or on the other hand side, why do the EUR 100 million at all.
No, we replaced the hybrid, which was EUR 300 million. I don't know if you said EUR 300 million or EUR 400 million.
EUR 300 million.
EUR 300 million. We replaced it already in the last year by neutral [indiscernible]. And now this is the remaining portion of equity increased from the good results last year from the pension effect and so on. So that was not the focus. It was more, and you know that it was more market testing on what the market could give. I would probably with a coupon of 8% or 9%, not implementing a higher hybrid in the range of EUR 300 million. I don't have to do it. So it's what we expect. You know what we expect from the Solar Trade transaction that would increase the equity of the group again into a range of 20 plus, I said 24%. And this is, I think, nothing that we have to worry today.
Yes, right. So thank you very much for all the details which leads me to my -- at least for the time being, a final question. When looking on your WACC calculations that you provided was the Q4 or full year 2022 results. Would you have to adjust them or revise them, let's say, significantly upwards in the light of what you have to pay for an equity instrument or, let's say, an equity-linked instrument in the current year. Would that imply that the WACC has to go up from quite significantly from what you pencil in for 2022? Or is that not the way to look at it?
The WACC calculation will be performed at by the end of the year in November -- on the November numbers and on the outlook of what we expect then for the capital markets to be if I'm looking on the U.S. market, which is quite important also for the WACC calculation on our projects in the U.S., we have some bigger one there in the renewable energy. I'm pretty relaxed. You know that the inflation rates are reducing. In the U.S., we have seen and we are well on the market that the interest rates might be first cut already in the U.S. by the end of the year. And I do not expect a higher impact or we will see what that means for the second half of the year for the European and the German market. So we are overlooking this and we are always in contact with -- also with our auditors on this issue. But to summarize it, we do not expect dramatically or significantly higher WACC to come from today's perspective.
Oliver, just it's me again, Josko, I looked up in the meantime, regarding your 2.1 gigawatt. It's like following 800 megawatts are going to be sold externally, 1.2 or up 1.2 gigawatts are going to be transferred into the IPP portfolio into the IPP unit but just [ 200 ] will be in place, and the remaining 1 gigawatt will be under construction, okay?
The 800-megawatt IPP business that you stated at the year-end 2022, was that all already in place and operational or was part of that also under construction.
But this is in place in the last 2 years, I would say, the 800 megawatts. They are already in place.
The next question comes from the line of Knud Hinkel from Pareto Securities.
I have a question on the balance sheet. So on Slide 28. That is despite prices were coming down and probably also working capital, it seems that the balance sheet of BayWa gets longer over time. I've looked into your balance sheet, it seems that you -- your -- the assets -- fixed assets has increased and the intangible assets has increased quite -- quite a lot by, I think, a second by -- yes, by EUR 200 million, probably plant and equipment and intangible assets EUR 20 million. That is almost the CapEx budget for an entire year. Maybe you can say what is the driver behind that movement in Q1?
My second question would be on your largest segment, renewable energy. Maybe you can provide a little bit of a breakdown how that flips into different buckets. You already mentioned that Solar Trade was around -- if I got that right, around contributing EBIT of EUR 23 million. Maybe you can also give an insight how much comes from IPP and from project business. That would be my second question.
And the third question, yes, on inflation, again, maybe we talk every quarter on West Cost inflation and provided an update so far. No reason for huge concerns. Maybe you can give an update what would you see here coming this year again.
I'm starting for the first question, but I have to reask you because the connection is not very good here on the phone. The first one was on the balance sheet on the increase of fixed assets I got. I did not get the second increase position. Was it the intangible or was it on the intangible asset?
Yes. Okay.
So the fixed asset increase and that was first thing is quite the easy answer. This is the switch from inventories to fixed assets from the IPP business. So that all relates to assets that are reclassed from work in process into the fixed assets line.
On the intangible assets, I see the increase of some EUR 20 million that comes out of prepayment. I'm looking on my colleague here on the left side. I don't know exactly right now. But that came throughout it. We check it in between because that must be dedicated from one specific company.
And then the question, welcome from my side, the question of the contribution to the EBIT of the renewable energy, as we mentioned before, not a single project was sold in Q1. So obviously, no results from wind solar projects and -- let's look at the figures. EUR 42 million is the IPP and EUR 23 million is the Solar Trade. And then, of course, the -- the costs are running against that, and that will -- then we will come to the EUR 53 million you can see in the presentation. And I guess there was another question.
The last one, we did not get the last one. Could you please repeat your last question?
Yes. That was just a general question on wage cost inflation, how do you see it for the current year?
Salary payments, you may?
Salary payments, yes.
We are currently in the negotiation with the trade union, and we have price an increase of a single-digit figure in percentage in our budget, and we will see the negotiation within the next 3 to 4 weeks to hopefully be finalized, but we can scope with that. As long as it is not over, I'd say, a figure over 13%. We will now see how the [indiscernible] will finish its talks, but we are optimistic that we -- the increase we have priced into our budget, we'll handle that.
And back on your first question with the intangibles, we are still looking at it. It was not in goodwill. So we have to find out there have been some prepayments on a minor company transaction or something like that. We will check it out and then send the answer to you. Thank you.
We currently have no questions coming through. [Operator Instructions] Okay. There are no -- there are no further questions indeed. So I will hand you back to Josko to conclude today's conference. Okay.
Thank you very much, Marcus Pollinger and Mr. Helber and thank you as well for your interest. And we all hope to see you at our Capital Market Day on the 6th of July. The advantage of the Capital Market Day is we hope to see you all in person. So there will be no technical difficulties, I hope.
And absolutely. And thank you from my side, Marcus speaking, that you didn't give me a too hard time on my first analyst call. So thank you for that.
So thank you and have a successfully reporting season. Thank you very much.