BayWa’s H1 2024 revenues declined by 14.7% YoY due to a decline in the renewable energies segment
It blames the price decline in PV components like modules and inverters that lowered its trading margins
Sharp fall in electricity prices also led to its earnings in energy trading falling due to lower margins
The management has appointed a CRO to help restructure the business and achieve profitability
Germany-headquartered diversified business group BayWa, active in the fields of construction, agriculture and energy, has reported a 14.7% year-on-year (YoY) decline in its consolidated revenues for H1 2024 with €10.7 billion ($11.89 billion). The management attributes the declining sales to its renewable energies segment under the Energy business unit where the price war for PV components spread beyond solar modules to other components like inverters.
This, according to the management, caused the trading margins to fall sharply and inventory write-downs of around €30 million ($33.35 million) in the Solar Trade business. While sales of the solar modules remained stable, the sales volumes of inverters declined by 25% YoY.
Earnings in energy trading also fell due to lower margins thanks to the sharp fall in electricity prices and the expiration of contracts that were concluded at attractive terms at the height of the energy crisis.
For the renewable energies segment, its revenues of €1.81 billion ($2 billion) represented a YoY drop of 40.6%, while EBIT was in the negative with €102.8 million ($114.28 million), a 100% decline over €98.4 million in the previous year.
The group’s impairment loss during the reporting period totaled €222.2 million ($247 million), with the renewable energies segment accounting for €171.5 million ($190.65 million). A large part of the write-downs at €114.4 million ($127 million) relates to the non-current assets of its independent power producer (IPP) business, i.e. the company’s own wind and solar farms selling the electricity generation.
It explained, “The depreciation is primarily due to adjusted valuation assumptions compared to 31 December 2023. This mainly concerns lower electricity price curves, changed assumptions regarding grid feed-in, rising capital costs, changes in the terms of some leases and increased financing costs. Amortisation of goodwill and non-current assets was also carried out. Some of these value adjustments are already part of initiated and planned restructuring measures aimed at optimising the BayWa r.e. portfolio.”
In the project business, only a small number of projects, mainly project rights, were sold in H1 2024. The majority of project sales are expected in Q4 this year. In total, project sales with gross revenues of around 0.8 GW and project rights sales with gross revenues of 2.4 GW are planned for the 2024 financial year.
Its strategy of selling projects at an earlier stage of development is aimed at reducing the amount of capital tied up in the project business in the current market environment of higher interest rates. It will help improve the liquidity structure for the long term.
Recently, the company appointed a Chief Restructuring Officer (CRO) and Chief Representative of BayWa AG, Michael Baur to help stabilize BayWa and achieve profitability.
A year ago, BayWa offloaded its international Solar Trade Business to use resources for its project development business (see BayWa To Offload International Solar Trading Business).