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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to BayWa Analyst Conference Call Q2 2022. Today's call is being recorded. I would now like to turn the call over to Josko Radeljic. Please go ahead, sir.
Thank you. Good morning, everybody, and welcome to our analyst conference on the half year results of the fiscal year 2022. As you probably have seen, we have disclosed our group EBIT roughly 2 weeks ago via a talk. Additionally, we have given you an idea about our EBIT expectation for this year.
Today, Professor Lutz, our CEO; and Andreas Helber, our CFO, will give you a deeper insight into the development of the business and the financial figures. At the end of the presentation, we will be happy to take your questions. For formal reasons, let me also note that we have sent out all relevant documents and that you can download it from the Investor Relations website.
I hand over now to Professor Lutz.
Ladies and gentlemen, welcome to our half year analyst conference. I'm more than happy to provide to you the excellent, most excellent and best figures ever in the 100 years history of BayWa. I just called number of the page, and then we go through the presentation.
What is the headline. The headline is we have really an outstanding increase of earnings across all our operational businesses and business models up to EUR 12 billion -- nearly EUR 13 billion.
For those of you who are with us for many years. You know exactly that as I started in 2008, we had EUR 7.5 billion, now nearly EUR 13 billion in the first half and the EUR 7.5 billion. This was the overall result in 12 months. EBIT is up to EUR 329 million, which is also an excellent performance. And for you guys as analysts and fund managers and so forth, EPS, 3.3%, as we say, call this in German language, this is a [Foreign Language].
Maybe the key outlook headline for the future is -- because normally with such figures, I don't know what we need to discuss here, but the outlook will be for the future, for the next years because in several business models and business segments, we are much better than we thought we will be in '22 and the increase of the profitability was expected over the next years because we have a sustainable step-by-step increased planned budget for the next years.
So we think we means, Andreas Helber, our CFO; and myself that the future management will keep the profitability on such level. Nevertheless, we go through a review process in November, and we are coming back with the year -- full year analyst conference in March next year with some more concrete explanation for the guidance without -- of course, as always, without providing figures to you. So the overall picture is extremely positive.
Some highlights, well, you can read it on your own on Page 4. Interesting is that we face the closing of the sale of our greenhouse activity in the United Arab Emirates and the Cefetra specialty strategy has been embedded by a majority takeover of Heinrich Brüning in Hamburg, which is a nut and dry fruit trader.
And you know that in Serbia, we acquired, we means RWA, our subsidiary in Vienna, acquired a compound feed company called Patent Corporation. This legal entity is for the very first time consolidated now in our balance sheet.
Page 5 and 6, you see the outstanding performance in Q2 and then the overall performance in the first half year. We come to the energy sector. There is nothing new in the market developments. I do not want to repeat myself because we explained it last time very -- in some more details.
The key is solar business all over the world, then the onshore wind energy in the future, we'll see also some figures regarding the offshore activities because we won just in front of the coast of Scotland 1 gigawatt tender for a offshore operation.
On the right side, you see the heating oil development. So the increase and the volatility on the one side, but the increased prices was very useful for our business development.
So let me turn to Page 9, you'll see the result. The revenue is up to EUR 2.7 billion. This is really outstanding. The reason for that is the growth in the solar business and the solar module trading business, the PV modules up to 77% year-on-year and the inverters plus 52%.
The question is obvious do we have problems with the supply chain. At this point in time, we do not see really a decrease or a broken supply chain. Our storage was very high. This was the reason for the overall positive development in the trading and distribution business, not only in the renewable energy, but also in Agri and Building Materials.
Our stock inventory was extremely high. This was planned by the management. It was a very smart move to be in the position to deliver all the goods -- required goods from the customers. It was very smart. Of course, the other way around, if we had now negative figures, I would say, this is the market development.
So you see here, EUR 2.7 billion, EUR 85 million EBIT has to do, especially with the growth, as I said, in the solar business and the energy trade. We expect outlook '22 another record high in the performance of RE and we expect 1.2 gigawatt to be sold or to be included in our new IPP strategy and the high level -- and the high volumes on PV components will be sustainable over the next months.
Page 10. You see the excellent performance in energy business, EUR 1.4 billion revenue, EUR 20 million EBIT has to do with high demand for heating oil, especially but also pellets, people fear that something is going to happen in the winter period.
Of course, we turned to the Agri business. The key message I have for you guys is on Page 12. This is the global balance sheet for Agri products. So grain, of course, especially excluded rice, and you see here with minus [ 13% ], which is the storage level for '22, '23. We are not really in the position to be able, for instance, to replace a default or a decrease or a decline of volume coming from Russia and Ukraine.
Page 13, well, I do not want to explain that because it's self-explaining. The Agri products, the price development at the [indiscernible] and Chicago Board of Trade. You see also on Page 14, the development for fertilizers, which is extremely important for our business success this year.
On Page 15, you see the Cefetra Group based in Rotterdam, EUR 3 billion revenues and EUR 36.6 million EBIT. The reason for that is we have a price really, of course, and the volatility is always supporting the Agri commodity business of Cefetra, but especially the specialty business, especially the specialty, nice wording.
So the niche businesses where we invested over the last year, last year is a lot of money in Tracomex and company. You know that, I guess. So this is a very interesting development because more than 60% of the profitability comes from the specialty strategy. So it was the right decision to go this -- to make this move and to leave a little bit volume and to reduce the volume for the commodities because this business is much more risky than the specialty business.
And interesting enough, we have an overcompensation of a loss of EUR 70 million, which we had in Odesa due to the default on grain contracts because we didn't get the volumes out of Ukraine. We had 4 Panamax vessels in the harbor of Odesa, we had to leave just before the deck emptied and one was 50% loaded only. With other words, the EUR 70 million loss was created by spot market procurement activities of Cefetra to fulfill the contracts with customers.
16. You see here really outstanding performance of the Agri Trade & Service segment which means Germany, Austria and Eastern Europe, revenue of nearly EUR 3 billion and EUR 134 million EBIT. So this is -- this is really excellent. If you take in consideration that a few years ago, we had still a loss situation, especially in Germany, but also Germany is back -- and back on track.
Reason for that fertilizer, we had some windfall profits, but especially in the trading activity in the open book, which was very positive, has come true, so to say, now in the P&L statement. So excellent results.
Page 17 is the same with our Agri equipment, the machinery business, more than EUR 1 billion revenue in the first 6 months, EUR 35 million. And so we have a stable order intake, and the order backlog was in the first month very high as well. And just to fulfill the contracts with the customers was and is the reason for this outstanding performance.
Maybe you ask what's happening with the chip crisis, how do you manage that? So first of all, here, stock inventory was high, first of all. Secondly, we are also shipping from, for instance, [indiscernible] tractors to the customers without all the necessary chips, so to say, so it's much more mechanical as it was over the last years, but the car industry has the same situation.
Global produce here, we are more or less in a stable performance revenue more or less the same in last year, EBITDA a little bit higher. And the reason for that is that TFC or tropical food company [ Mastek ] in the Netherlands, responsible for the shipping of avocados, nashi pears and whatever, here, the logistic costs are extremely high because the containers are, as you might know, very expensive.
Normally, you pay $1,200, $1,500 per container. Now we're up to $12,000. The peak was around about $20,000 per container. The outlook is nevertheless positive. We expect a similar results in last year.
Building Materials. The market tendency in Page 20 is in tech still is on track. No significant changes, which leads in '21 to a super result, EUR 1.1 billion of revenue and EUR 43.5 million EBIT. As I said, order intake extremely positive. The growth all over the entire product range.
And we have positive earnings in the contribution from our building project GmbH, and we are selling now apartments step-by-step over the next years. And as you know, it's our goal that was split 50-50, 50% in Building Materials, and 50%, yes, the project development of houses and buildings and the sale of apartments and flats.
The outlook is positive or is in so far fine. So bottom line, first part of our presentation, excellent results. Congratulations to my team. Congratulations to all the employees and the stakeholders of BayWa.
Unfortunately, the share price is not there where I expected to see the share price, it should be more EUR 100. Yes, that's my feeling. And so far, there's still room for improvement over the next hours. And you are guys you are responsible to help us here to increase the share price. So that's -- this is my statement.
And Andreas, you come now to the explanation of the financials.
Yes, good morning, ladies and gentlemen, also from my side. A couple of words to add maybe on the financials, and I'll continue on Page 23 with the other activities. As you know, this is our cost center covering all the administrative costs.
You see that we are a bit down compared to last year at roughly EUR 38 million. But as we already indicated at previous conferences and in previous calls also on our Capital Market Day, we expect this number to be full year in the range of EUR 70 million.
The higher cost for the first 6 months comes out of the highly increased premiums of our D&O insurance. You probably have been aware with that effect of other companies that the D&O insurance went up dramatically, and that brought up by EUR 3.5 million for the first 6 months. A couple of exchange rate differences and cost of our -- I'll just read through the ratio. Digital merchandising management system, this is really strange into our ERP system that we are going to remove and improve it. So EUR 1.5 million additional costs for the first 6 months. But nevertheless, on level for the full year contribution of EUR 70 million costs.
Coming to the next 3 pages, and that summarizes what Klaus just guided you through the excellent performance of all 3 business units. You know that we changed the termination -- the terminus on segment, which are the individual segments now comprising the business unit and energy. This is renewable and the classical energy. You see the numbers.
Be reminded that the bigger part within the RE business, they are standing at EUR 85 million for the half year period will only come in the second half of the year. So this also is reflected in our outlook that we gave earlier this month with EUR 400 million to EUR 450 million overall EBIT contribution for the full year 2022.
So the numbers here for the Energy segment all up, wonderful performance and mostly driven in the first 6 months on solar trade and the energy trading business, not so much on project sales.
Next page, agriculture summarizes the excellent performance of the 4 segments, as Klaus indicated, with up EBITDA on EUR 275 million and the EBIT at EUR 222 million. This is an excellent performance, of course, driven by all segments, but strongly by the domestic business here in Germany and in Austria. Very easy, the next one on building materials with the business unit as a segment. So jumping over that.
And that brings me to the summarize -- the summary of the income statement. Overall, it's, I might say, too nice not to look at it for a minute. Revenue up at EUR 12 billion -- over EUR 13 billion for the first 6 months of the year. And the EBITDA, which is also an important number for our leverage structure full year, it's up at EUR 455 million, and that has been the full year number last year accordingly.
So what we expect and that's also good for the leverage at least something in between EUR 750 million to EUR 800 million on EBITDA level for the full year coming to the EBIT of EUR 400 million to EUR 450 million. So that could be the number where it comes out.
And the good news also if you look on the EPS, which is at EUR 3.33, so EUR 3.33, might say per share, and that reflects that the increase in results mostly come out of the mother company's share. And that's good news also to see that the improvements being made in the various divisions are coming through also in our domestic business, very strong performance on domestic agribusiness as we have seen it.
One word on the balance sheet. I mean, it's a snapshot after the half year period. The equity up at roughly EUR 1.2 billion per 6 months. That's, of course, driven by the excellent performance through the net results, but also by the increase in equity by the downturn on the interest rate on the pension liability.
That is reflected in the interest costs on one hand, but also on the positive effect on the equity on the interest on the pension accruals. So that brought in some EUR 150 million. We had a counter effect from the valuation of our shareholdings in the RBE in Austria that also went through the equity with a negative effect of some EUR 59 million or net EUR 40 million after tax.
So that brings the equity position to the [ EUR 1.97 billion ] where it is with an equity ratio of 15.5%. So well over 15%, and that will increase towards the year-end as we are going to reduce the overall total asset number due to the seasonality, which is in here now for the -- within the half year that will go out towards the year-end.
So not a lot of things to say. We reduced inventory on the Agri products. On the other hand, we increased inventory. So we are level on level on the same level at least after 6 months, we increased the inventory on the project side, and these are the projects that we are going to sell in the second half of the year.
And this is also reflected in the cash flow statement. Final page of the presentation. So far, cash earnings strongly up after 6 months at roughly EUR 390 million from operating activities, mainly flat. That's reflecting the valuation or the variation in inventory on one hand and the strong increase on receivables due to the half year cut off in our activities, investment activities up to EUR 183 million.
This is reflecting the investment, mostly the investment in the Serbia feed -- compound feed facility Patent Co. You remember that the closing was already in the first quarter by our Austrian colleagues in Vienna. Financing activity is all good on that.
And that completes the cash flow statement for the first 6 months. And that should be it, in short, and we already made the outlook. Klaus made the outlook on the segments. We overall got the guidance up to EUR 400 million to EUR 450 million, which has been published earlier this month.
I think this reflects the excellent performance even we are a bit more cautious on the second half of the year. I think we are coming to that in a minute in the Q&A session, mostly driven by the domestic AG business where we expect more or less flat or even a little downturn because of the business is almost through, and we are in the harvesting season.
So this is the main driver on the AG business. But the performance of the renewable is still to come, and that brings us up to the guidance that we published to the market.
And I think that should be it. And now we are turning back to Josko and to your questions.
Thank you very much, Mr. Helber. Thank you, Professor Lutz. So we are ready now to take your questions.
[Operator Instructions].
If there are no questions, we can stop this conference.
We'll take our first question from Oliver from Warburg.
Congratulations to the spectacular results. It's so nice to see all the pieces to fall into the right places. So -- but still, I need to disappoint Dr. Lutz and ask a few questions if I may.
No. I would be disappointed if you hadn't had any questions, then I will [indiscernible] I tell you.
I promise I won't keep you away too long from your morning coffee in that regard. First and foremost, in my mind, guys, can we just get serious for a second year, the outlook.
I mean, what you have to do now is to send all your employees on a prolonged holiday until the end of the year with the exception of the people working in BayWa RE and you still will be at the midrange of the given guidance quite comfortably. So is your message to the market really that all other segments are likely to be result neutral until the end of the year?
Well, as Andreas pointed out that we are in the harvest season for Germany now. But I do not expect a flat development. Let's go through the different businesses, okay? Yes. So first of all, I don't see a flat development in Cefetra. Cefetra will Increase the profitability. I do not see a flat development in Global Produce, we increase, of course, we have to, if I say, a similar performance like last year.
Now we have, I think, EUR 16 million. So there are another EUR 20 million something to go, so we will have more than EUR 40 million. We see in Cefetra something like -- well, I don't know, EUR 50 million to EUR 60 million, for instance.
And what do we have else, the normal energy. While this depends, of course, on the on the energy crisis situation, of course, gas and oil, what's happening here in Germany and the Austria because these are the main markets, the key markets for us. But also in the energy sector, we expect another few millions on top. This is a very conservative approach. RE much more than EUR 200 million. It's something between EUR 200 million in EUR 250 million.
If you don't know what's happening, you take the middle off, and you are not far away from the truth, maybe. So this is also a significant upside and what we do have else. So the question is the domestic Agri business, which is, of course, a mixture of Eastern European activities of Germany and Austria.
In Germany, I do not see an increase of profitability at this point in time. It will go down. It will go down because we are through the outputs for the Agri resources like fertilizer and crop protection, we are in the harvest season. So I do not expect anything at this point in time. We will have to take some tough decisions regarding the intake of storage for fertilizers in autumn.
So after the summer season, which ends in -- I would have said Germany, but the [ various ], of course, Germany, more or less. That is the appendix. So in the middle of September, then we start the discussion, what do we do here, but we don't expect a profitability increase at all. So it's a decrease. It's hard to say what's happening in Eastern Europe at this point.
Also our new compound feed company in Serbia. If you look at the overall political situation at the Balkans and especially Serbia, we don't know what's happening. We are conservative here as well. So we think it's a flat development, and the RWA will also be, let me say, flat. So the issue is Germany, the Agri business in Germany where we expect a decrease in profitability in the next 6 months.
The rest is going to be of course, much better, Building Materials, EUR 60 million, maybe EUR 65 million, something like that. And at the end of the day, operational performance around -- well, my calculation is more or less EUR 500 million, then we have the overall cost.
And the investments in innovation, digital -- our digital activities and all that [ happen ] for every year, the same. So -- and this leads us to EUR 450 million, maybe again, the truth and the reality is in the middle of. So this is my explanation going through the key businesses of BayWa.
Okay. My calculation was deviating a bit from yours, Dr. Lutz. I was taking, let's say, a peak at last year's second half numbers. EBIT was at EUR 122 million for that period. Attributable to RE was, give or take, EUR 40 million in that time frame that is, let's say, EUR 80 million for all the other activities.
I said, okay, give or take, maybe flattish given the markets and the risks you already alluded to. But we'll get, let's say, a contribution of RE when I got you right, Dr. -- Mr. Helber of more than EUR 100 million, which would equate to EUR 100 million plus EUR 80 million.
So that's like, give or take, EUR 180 million plus the EUR 330 million we got in the first half year that would exceed even EUR 500 million by some margin. That was my -- let's say, my back off on the envelope calculation that I did.
Yes. But this is not such a deviation. If you take only the operational performance, the operational performance is absolutely in line with what you are saying from our calculation point of view. And then we have the overall cost and the innovation investments and all that stuff, which is not included in the different business segments.
A complete the equity ...
Mr. Schwarz, maybe just to be clear on that, the rates almost run on energy business for the second half on the -- also on the technical agricultural equipment business. They had a very strong performance in the first 6 months.
So the -- as Klaus said, the increase there is just in a couple of millions, where the big contributor for the second half of the year is the RE business. And we have to state that we are expecting downturn from that excellent result from EUR 135 million for the 6-month period on the Agri business, that goes down to at least EUR 100 million or even less. So this is the one thing.
And overall, on the EUR 500 million, to be clear on that, if you calculate the EUR 500, you already deducted the cost portion, I guess. So we have the EUR 500 million and then we deducted cost portion that brings us up to the range of between EUR 400 million and EUR 450 million. Maybe it could come out even better, but this is our conservative assumption that we gave to the capital market.
Okay. Let me probe you on that one. What has to happen for you to go down to EUR 400 million? Does the world needs to implode? Or is it less severe than that?
Taiwan, [indiscernible]. The question, what's happening at the commodity side, taking in consideration that the reality is that one train, truck or not one -- trains and trucks, plus the one vessel with 26,000 tonnes, which is nothing is the end of the story.
Then we will have a problem in providing enough commodities to the Black African and the Arabic African world regarding the question, do we expect starving situation over there. So that's a key thing because this will have immediately an impact on the price development upside.
If you see a significant upside, then it's better if this is not the case and Putin -- if Putin is fulfilling his promises, [indiscernible] on this PR tool, I would call it, in Africa, if he's fulfilling exactly his commitments and promises then I expect a flat or even a decline in the commodity prices.
And we have some very detailed analysis about the development in Ukraine. Maybe you've heard about it. We have this big news conference with more or less all relevant magazines, TV stations and blah, blah, blah concerning the evaluation with the GmBH, our satellite data evaluation company [ made ] , and this is really pretty interesting.
But the insecurity is extremely high. So we are more on the conservative side, we say, EUR 400 million to EUR 450 million. But as Andreas said, maybe it could be better as well. And the key driver is not Agri at the end of the day, it's renewable energy.
And one additional word on the Building Materials sector. As we already pointed out, the Capital Market Day, there are some slowdowns, call it this way, in the second half of the year. So we'll probably not go into the range of last year's result of EUR 73 million. It will be a good performance, but this is also one of the weaker developments for the second half of the year.
Nevertheless, and that's also important on already looking on '23, we are already within the RE business within the project sales, shifting projects into '23 to also make this year a good one. And additionally, we are in the harvesting season. We made pretty good contracts already as we did last year, and this supported or benefit the -- supported the performance in the first 6 months of this year.
We made already some good contracts that will come through only in the beginning of '23. So also on that side, we are not unhappy with the performance that we see in the second half of the year and also not what we see already for '23.
And you see here again, how important the international business is for us. And here, especially renewable energy. You know that we have an agreement with EIP in Zurich over the next years. The budget goes [ till '28 ]. And what -- without going into details because we are not allowed to publish, of course, the detailed figures, but it's interesting in '22, we expect more or less the result of, let me say, [ EUR 425 million ]. . So we have not a postponing, but a pre-success, I would call it this way, please, I'm not concentrated today. I don't know what's happening. A pre-success story. You understand what I mean because the plans were a little bit different. And now it's extremely important to go through a review process of the budgets in November because maybe it will be even better in the next year.
It could be, and this depends on the performance of renewable energy. This is the key driver for much better overall results also for BayWa. And this needs to be discussed with Zurich. This needs to be discussed with the operational management because what I expect then as the Chairman of BayWa r.e AG, as you know, I'm the Supervisory Board Chairman.
What I expect is the detailed explanation from the operational management. What does it mean if we are ahead of accomplishing the promised budgets over the next year already now, what does it mean for the future from a logical point of view and to take your calculation. And as you are from your personality point of view and maybe I need you as a consultant for this, we need to discuss this with the others that from a normal point of view, we have to add this on the expectation for the next years, this over-budget success at this point in time, but I don't know.
And this needs to be reviewed very carefully. So please do not add just the overperformance on the expected budget for the next years because this will put too much pressure on the management.
Okay. I I'm fine with that. But then we have to deduct some euros from your EUR 100 price target of BayWa, of course.
This is very disappointing.
I know, I know. I'm so sorry for that. Second question, Mr. Helber, could you give me the number of -- when looking at your almost EUR 2 billion equity. How much of that is attributable to BayWa r.e.? And how much of that is attributable to the rest of the group?
You might see that -- now that's the only in the profit. On the equity -- let me look after that. Do you have a third question, then I could look after the second one? [indiscernible] we have to -- I guess it should be roughly I guess it now. Out of the -- we had -- the increase was EUR 500 million and EUR 300 million was original. So it brings it up to EUR 800 million. EUR 451 million is to BayWa.
Mr. Helber is calculating.
I would say [ EUR 1.5 billion ] to BayWa, [ EUR 400 million ] to RE. And then now we recheck it -- and I'll give you the right number in a minute.
And the question is what are we doing then with Andreas, if he was wrong.
There is some margin for error here. Don't be too cruel him. That wouldn't be fair.
The other question?
Yes. My third and last question is, obviously, Suplendid results, very good cash flow in H1. Still looking at your both long-term and short-term debt commitments, obviously, also driven by the expansion in working capital. They have not come down, but have slightly gone up. . When trying to extrapolate that to the end of the year, especially keeping in mind that there will be a huge influx from -- of cash from RE product sold until the end of the year because that tends to be back-end loaded. Is there, let's say, is there a target for financial net debt that you might be willing to share for the end of the year?
I have no financial target on it. I would say the level that we have now, which is driven by seasonality, of course, would probably be on level also for the year-end. Why that? Because I'm expecting higher intake of -- from the harvesting season. So we are just preparing that. And then we have a different price levers covering the harvest which was coming in. On the other hand, we have some postponing on project sales towards the year-end. We expected that our -- the original plan was some EUR 400 million to EUR 500 million on project sales coming in at year-end. That's now down at EUR 300 million. So it will be slightly a number, but I expect that on a level EUR 4 billion plus EUR 100 million, EUR 200 million maybe. So that would be my target range.
Okay. Cool. That was all my questions for the ...
And if I'm reflecting your question to go into the direction on calculating leverage or the overall debt position, be reminded that a higher portion of deductible inventories, you know the way how we calculate the leverage on the readily marketable inventories is to be expected by year-end.
Last year, it was roughly EUR 900 million, I guess, or EUR 800 million, something like that. I expect that number to be at least in EUR 1 billion or maybe EUR 1.1 billion in total due to the pricing ...
Yes, due to higher prices but lower fertilizer volumes. That was my expectation as well.
Yes. yes. But the fertilizer levels, I think the inventory levels have not that big impact as it has on the harvest products.
Absolutely. Okay. Okay. Thank you for that. That was all my 3 questions.
So thank you. And I have a proposal as compromised, EUR 100 will be your recommendation at half year. So EUR 50 for the half year is fine.
I will take that into account.
So we have further questions, so we'll probably do it now.
We'll take our next question from Heinz Müller from Dr. Kalliwoda Research.
Before Mr. Müller starts, could I answer the second question of Mr. Schwarz. And I'm proud to be -- sorry, Mr. Müller, just a second.
Mr. Schwabs, are you still around, I hope so. Just to answer the second question of the share of equity, towards RE. And that's, as I said, roughly in a range of EUR 400 million to EUR 450 million, EUR 935 million is the total equity on the RE and EUR 51 million of that goes to BayWa and the remaining part goes to the minority not to RE. So it was not that bad, my guess, I guess. I still -- can I stay here?
You can stay here, and you get a reward. You have to pay the bottle of champagne for me. That's your reward that you are allowed to pay something.
Yes, Müller, go ahead.
Yes. Also congratulations from my side to you on the very impressive figures, which were far beyond our former targets, especially with regard to EBIT. So congratulations.
My first question is with regard to the Innovation segment, very small. But I think due to the subsidy program, [indiscernible], farmers are heavily investing in improved equipment especially a slurry applicator, fertilizer distributors and sprayers which were equipped with [ high sophisticated software and GBS hardened software ]. So why this is not still visible in the figures of the innovation and digitalization segment, which still show a loss?
And the second question is with regard to the cereal prices. So due to the fact that grain exports from Ukraine will become possible again. So do you think that the high grain prices will decrease to former levels? So those are my questions.
Well, I'll start with the second one. We have a detailed evaluation, as I said, from Vista GmbH regarding the harvest and the storage in Ukraine and especially logistics systems, the distribution systems and all that stuff, this is still broken more or less. And we should not be misled by publications and reports on TV and also online and so forth.
I don't expect a decrease in commodity prices at this point in time. Of course, it depends a little bit what's happening if really 20 million tonnes from Russia and Ukraine will be shipped to Africa. If this is the case.
So business as usual, then hedge funds in the Chicago Board of trade and so forth, they are in the position to influence significantly the share -- not the share by, sorry, the commodity price at this point in time, we don't have any forecast, which shows something like I said. So more flat plus increase. That's one answer.
And the second one is, of course, the [indiscernible] is a great success so far that last year and this year, the farmers are investing. It has also to do with the high liquidity situation for the farmers due to the commodity prices, and it has to do with the mistrust of farmers in the future of the euro.
If you remember, we had the discussion 14 years ago in the financial crisis already and also to protect their businesses in so far. The problem is only that even selling software licenses and consultancy contracts and maintenance contracts to farmers regarding the digitalization process and also to improve the processes through software applications is not sufficient to carry the load of investments in all these cloud-based new products of BayWa.
So what is the point? The point is you will see here a much better figure only if we can reach an international global approach, and this is not new. That's what I'm saying for years. And I have to admit that we are not really successful in a global international rolling out process for all these software applications.
And this has to do that we do not find the right resources. I mean the workforce. For instance, we are right now negotiating -- just to give you a flavor, negotiating contracts with farmers with big farmers, much bigger than here in Europe. -- in Thailand, for instance, in India and other countries.
The problem is only who is going to service the customers in these countries. And this is not easy because to find the people is really tough. So [Foreign Language], as we call it in Germany, is really a significant issue we have to deal with. And well, I don't know. Is this sufficient as an answer for you?
Yes, of course.
We'll take our next question from Guido Hoymann from Metzler.
Three questions from my side, please. The first one is addressing the U.S. dollar movements. I think U.S. dollar has been obviously very strong this year. And I assume that has been supported for your RE business, et cetera,[ to reduce], So am I right here? And can you quantify the impact on your results? That would be the first one.
The second one, I think we have addressed it partially already, but to sum it up, you mentioned in your Q1 call, the risk of component shortages, especially in RE, i.e., PV components [indiscernible] in the agricultural equipment segment. So has the situation actually improved a little bit? Is it still bad? Or how is the situation here?
Because particularly in RE, which is, of course, your major growth driver probably also for next year. And I understand that you had piled up quite some stock. But if this runs out yes, could that threaten your, let's say, short, medium-term perspectives.
And last but not least, maybe more of sort of a strategical question and maybe somewhat strained. But is there any chance actually to reincrease your stake in RE? Again, we know that you have diluted it 50% or whatever [indiscernible] share.
But talking about [indiscernible] par value of the company, we should of course, and we -- I think most people are aware that 50% of your RE profits or EBITDA go out of the group in the end. So is there any option, any thinking about increasing the stake again?
Okay. Mr. Hoymann, I'll start with the component because it is easy to answer. We have great storage facility in renewable energy, especially. And our supplier portfolio is much broader than it was in the past. So what we did or what the operation management did is to take action and to try to become much more independent on China and to buy as much as possible because we do not expect a decrease of components due to the demand on a global basis.
And so far, with regard to the first quarter analyst conference, I can say at this point in time, we do not see a broken supply chain for the components in the solar business. And the second -- the last question, an interesting one, by the way. I don't know what to say. Well, one thing is clear. We just started when we go together with EIP in Zurich to move forward with renewal energy. Our [ ESG ] is going to be much more professional also from a corporate governance point of view. So we are preparing, we call it, market readiness without making an announcement that we are willing to do so.
But it's becoming a very independent company. Of course, the consolidation is clear for us. We do not want to be diluted more but it was more than necessary to get that capital injection for the business, which is so fast growing and also to improve our bottom line significantly.
And as we might remember, we said originally, if we start with EIP as a partner, which is a very good cooperation by the way, also from a human point of view, that we will have a decrease in the results in the first year. So the opposite thing is happening at this point in time, and we do not see a decrease at all.
And so far, no change, storage good, broader supply chain range as we had and reincrease ROE at this point in time is not really subject to be discussed internally.
And there's no [indiscernible].
And it's a good one. Andreas, we do not have a put call or whatever option. It is -- we bought a stake on the basis of the evaluation and also 2 years ago -- 1.5 years ago. And then we are looking forward.
Our goal is to finance together a growth strategy for RE, including IPP. And this is a significant change to the original strategy of RE. Years ago, as we started with this business, it was our intention to get the revenue around about EUR 1 billion and EUR 50 million profit. So we are now in a complete different scenario. And now the question regarding the dollar ...
Mr. Hoymann, the question on the U.S. dollar impact. This is a very limited one. Normally, within the finance cycles of our entities, we are financed in local currency where we have an effect is on RE. Overall, net impact was for the half year EUR 3.1 million.
And secondly, we have an impact in our Global Produce business within New Zealand, and that came out with NZD 3.5 million. So it brings it down to EUR 2 million, roughly. So overall, the impact was a loss of EUR 5 million.
We'll take our next question from Anne Margaret Crow from Edison.
Good morning, gentlemen, and I would like to extend my deep congratulations regarding the first half results as well. It's brilliant set of results.
Thank you very much, Ms. Crow.
And I have a couple of questions regarding the project part of Building Materials. It's good to see that you're getting profits coming through from project sales there now. But could you give some view of what percentage of profits from that business unit, the projects are now?
What you're aiming for? And what's the capital investment required to reach your goal is likely to be? And in particular, is that -- capital that you require, is that self-financing? Is that going to be generated from previous project sales? Or will you have to finance that from other means?
Yes. Can we answer this Building Material question immediately because that's complex? And the team here was checking out the figures and so forth. What I wanted to say is the overall goal is to have a split.
It's similar to Cefetra in the Agri company in Rotterdam, 50% should come in the future from the project development business as a project means to develop building and sell it and 50% from the normal building material sector, so trading and distributing of different staff -- not staff, Building Material, material to the customers. So 50-50, that's the overall goal. So the concrete split is -- where is the split?
Now for the first 6 months, Ms. Crow, we have an EBIT contribution of EUR 5 million. So this is the contribution in '22 for the first 6 months, expecting a couple of millions coming on that in the second half of the year. As Klaus said, the split is 50-50.
So if it sums up to the total exposure of some EUR 20 million to EUR 25 million on contribution out of the project business when it's fully impacted. So for this year, I guess something between EUR 7 million to EUR 10 million. that would be a reasonable number for this year.
On the financing, this is quite interesting. We have an overall exposure of some EUR 200 million dedicated to the project business, but it's more or less, as you said, self-financing. This is the typical way how it works in Germany, if you buy these -- or if you build these projects and you sell them, the buyer has to give money step by step.
And so we get the money before we fully transfer the ownership on the project. You know what I mean? So it's financing of the customer. That makes it very interesting from the financing side. It's not that we always have to contribute the 100% or the total finance of this product.
These projects sums up to invest volume of up to EUR 10 million, EUR 5 million, EUR 6 million, but not that we have to finance it 100% by equity, but it's prefinanced by the customers.
Right. Now that's very helpful because that makes growth much. It meant not a drain on your resources, which is good.
We'll take our next question from Sven Sauer from Kepler Cheuvreux.
Also from my side, congratulations. I have only one question. Could you maybe elaborate the strategic rationale behind postponing the project development business, some of those projects in RE to the next year? Is this due to personnel shortage or because you think that obviously, it is the case because trading business is generating enough earnings in your view because the demand in the project business will presumably not drop in 2023? So I'm just wondering why -- what the strategic intention is behind postponing some of these projects?
Okay. May be in this a little bit misunderstanding. First of all, the earnings coming from the Energy Trading and the Components business are sufficient, and we are exceeding our budget already. Secondly, there is indeed no decline or drop in the expected project development over the next years.
And please correct me if the figure is wrong, but I think we have around about 20 gigawatts -- around about 20 gigawatts in the pipeline as options for building wind and solar plants all over the world, more or less, and it's increasing day-by-day.
So if you say postponing, then this isn't a tactical approach because in the beginning of investing in renewable energy, more than 10 years ago, we always said we make sure -- to the capital market, we make sure that we have a sustainable development in profitability. And then so far, that's a logical point of our strategy published many years ago. That's the one thing.
The other thing is -- but indeed, we have a shortage in workforce. And as I said already in my presentation that, for instance, if I have the figure correctly in my mind, [indiscernible] stuff is looking more or less for around about 10,000 people all over the world, not in Germany, of course, but all over the world for the project development.
And this is not easy. You need engineers, you need project managers, you need lawyers, especially because this is legally extremely complex and sometimes also complicated to build all these types of renewable energy facilities. So it's a mixture.
But nevertheless, one thing is also clear that there is a customer and saying, "I need to have in the fiscal year now for me, the acquisition of Blah, blah, blah solar or wind plant", then we are going to try to fulfill the customers' needs and wish.
If this is not necessary, so we play a little bit with a question of what do we need next year to make our budget also to be sustainable. And you can better as a fund manager or investor, potential investor, you can calculate on a safe basis what does this mean for the upcoming fiscal years.
We'll take our next question from Norbert Kalliwoda from Dr. Kalliwoda Research.
And congrats. My [indiscernible] question -- yes. first is, you have LNG fuel stations and power stations for e-mobility, can you give us some insights about the profitability and your budget? How was the development in the first half year? This would be helpful.
We check it out. I don't have it by half.
We have to look after the end...
If you have a further question, please proceed.
Yes. My other question would be subject China, the apple industry, the new plant age because this is a huge market, you said. And you -- there are 2 main brands ,Kanzi and Jazz. So is there any further competition expected? What is the development there in this market -- in this huge market of the apples in China and worldwide?
So first of all, the development is extremely positive. We have some customers in China, especially the Golden Wing Mau Group with all these royalty fees and licenses. For Envy, it's not country by the way. It's not counting shares -- the most demanded apple variety is Envy for the Asian market.
And over the last years, we started a project with our Chinese partner. You know that -- or maybe you don't know this Golden Wing Mau Group, which is one key distributor wholesale company for the retailers in China, especially Sensing and Shanghai area and Hong Kong.
We started a program that the farmers in China can plant, Envy, variety Envy, and we get the royalty fee for that. And this is going to be also in Europe and all over the world in the United States and so forth. A key part of the future business of stable produce in New Zealand or for Turners & Growers, our subsidiary over there, and it's a great success.
With other words, we don't see a decrease due to crisis or war or whatever, it's the other way around. The demand from China is extremely high.
Okay. Yes, good. And finally, please, the pension accruals. So you mentioned EUR 30 million as it approved. Can you give us again the reasons for the improvement of your balance position pension accruals?
Yes, of course, Mr. -- Dr. Kalliwoda. Firstly, the improvement of the reduction on the pension accrual was some EUR 150 million. So I guess you get the number wrong, EUR 150 million something -- in the range of EUR 150 million, and that came through the actuarial gains that came through the interest rate on the pension accrual. The pension accrual was -- or the interest rate on the pension accrual was on a level of roughly 1%, and it went up to roughly 3% now for -- after 6 months.
So this increase in the interest rate brought the pension accrual down by Mr. [indiscernible] give me the right number. I also was wrong, it was EUR 180 million overall, not EUR 150 million. So EUR 180 million was the effect -- the reduction effect on the accrual through the increase on the interest rate on the actual calculation.
The answer on your last question on the impact on e-mobility and LNG. This is only, to be honest, a very small one. it was overall EUR 1.1 million for the first 6 months compared to EUR 0.8 million the previous period.
So last year, it was EUR 800,000 increase by EUR 1.1 million, but this is still on a very yes low level, let's say it this way. It's only building up the e-fuel stations and the LNG ones. And LNG, I think there was not much business on the LNG construction this year.
And you see here, you have these political statements always blah, blah in the public newspaper and so forth, but reality is there is a slowdown. And it's not -- and that's for us here regarding energy change, change in environmental policy and all these things, it's not easy.
And it's -- basically it's not easy to get for all these activities, the permission from the authorities in Germany, that's clear. And I really know what I'm talking about you to my second job. [Foreign Language]
[Foreign Language]
[Foreign Language] And we made a selfie, and I said you should sell it because then he is going to be very rich.
[Foreign Language]
Mr. Kalliwoda, you can sell it as an NFT in the modern world.
[Foreign Language]
[Foreign Language]
[Foreign Language]
[Operator Instructions]
I think that there are no more questions. I know some of you are already on vacation, but you managed it to dial in. So thank you very much for your interest, for your participation. Next call will take place on 10th of November, but I'm sure you will hear us before. So we wish you all a nice summer break. Thank you very much.
Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect.