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Edited Transcript of BYW6.DE earnings conference call or presentation 7-May-20 6:30am GMT

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Q1 2020 BayWa AG Earnings Call München May 28, 2020 (Thomson StreetEvents) -- Edited Transcript of Baywa AG earnings conference call or presentation Thursday, May 7, 2020 at 6:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Andreas Helber BayWa Aktiengesellschaft - CFO & Member of the Management Board * Josko Radeljic BayWa Aktiengesellschaft - Head of IR ================================================================================ Conference Call Participants ================================================================================ * Anne Margaret Crow Edison Investment Research Limited - Industrials and Technology Analyst * Knud Hinkel Pareto Securities, Research Division - Analyst * Oliver Schwarz Warburg Research GmbH - Chemical Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the BayWa Analyst Conference Call Q1 2020. Today's conference is being recorded. At this time, I would like to turn the conference over to Josko Radeljic. Please go ahead, sir. -------------------------------------------------------------------------------- Josko Radeljic, BayWa Aktiengesellschaft - Head of IR [2] -------------------------------------------------------------------------------- Good morning, everybody, and welcome to BayWa's Conference Call on the Results of the First Quarter 2020. Today, we are in a smaller group, as the first quarter for us is not a most important one. So next to me sitting is Mr. Helber, our CFO; also [Mr. Kenneth Zar], our Head of Corporate Accounting; and [Mr. Von] from the Investor Relations team. As usual, we have sent out all information this morning. Otherwise, you can download it, as you know, from our website, Investor Relations website. And I will hand over now to Mr. Helber. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [3] -------------------------------------------------------------------------------- Yes. Good morning, ladies and gentlemen, also from my side here from Munich's BayWa tower on this very bright day in May, presenting the first quarter 2020 to you. We just met virtually a couple of weeks ago, so there's not a lot of news to tell. But we are, of course, running through the numbers in a minute. But before we do so, let me just -- I think the most important one for you also is with an opening statement on the COVID-19 situation within BayWa and what we all have seen throughout the last couple of weeks since we met in the end of March. So corona is dominating everything and also BayWa's business. And to make a very clear statement right in the beginning, this situation that we are running through all together shows how important BayWa's business is, and that we are in a kind of essential position in the industries that we are talking about. Looking at other industries and the struggle they are in, BayWa's business is running very stable through the corona situation -- through the corona crisis. And that shows us if it comes to basics, if it comes to, sorry, basic needs, then strength of a business model as ones of companies as of BayWa comes in front. And we also -- very changing demands in the last couple of days and weeks, demands are changing. It's a bit funny what we saw in France. They are asking for red wine. The people in the Netherlands are asking for other things. And in Germany, they were asking for toilet paper. But it just shows that it all comes to basic needs, and this is when it comes to BayWa. BayWa stands for eat, for heat and for living. And all other industries might be more glamorous than BayWa, but when it comes to a crisis, then the strength of our business model comes through. I think this is quite important as an opening statement also to what is still valid that the first quarter numbers, as Josko just pointed out, are less important or have not that big meaning, as you all know, for the ongoing quarters to come. But it gives you an indication. And more important for you is definitely the outlook on the business, as the business are running through the upcoming quarters. Nevertheless, I would start with the presentation, which has been sent out to you and just give you an overview of the development on Page 4, which is a summary for the first 3 months in 2020. You see the overall sales down by 5%. That's mainly driven, price-induced, by the energy sector mainly, and the international BAST trading activities, which has been reduced for some reasons, when I come back to it later. And if you look on the EBIT, the EBIT shows a minus EUR 27 million compared to a minus EUR 14 million the previous period. But please, remind you on the starting quarter in 2018, where we started with a minus EUR 41 million. The main effect that we saw in 2020 compared to 2019 is that in 2019, we had in the first quarter the sale of the Biomethan portfolio in the r.e., which came in with an onetime effect of roughly EUR 8 million overall. And then we have some effects that will -- I will point it out later when it comes to the other activities in the cost sector, which will be mainly postponing or adverse effect in the upcoming quarters. So this is just a flashlight, but -- and we'll point out the other activities segment. Overall, if we reduce or take out and look and take out these 2 effects from the bioenergy or the renewable energy portfolio as well as the other activities, then it shows that our traditional business are running pretty good. They are already in a positive area with [EUR 2.8 million] overall contribution positive, and that shows mainly (technical difficulty) this is a business (technical difficulty) within the type of (technical difficulty) [Iran --] put through the first quarter. We will also continue to do so in the months of April and May (technical difficulty) [stage.] Given the comparison over the first quarter, it shows the volatility that we have seen within the starting quarter. But traditionally -- and this is what I want to remind you, traditionally, the first quarter is always a minus quarter. It always starts with a minus. It depends on the promotion from the renewable energy section. If they have sold projects already in the first quarter or if not, today's or this year's plan is as it was in 2018, that the most of the projects will be sold later in the year, Q3 again and Q4. But -- and just to highlight this right in the beginning, we stick to the commitment that all the projects that we are planning to sell in 2020, from today's perspective, might also be realized despite the corona situation, might be realized in the financial year 2020. So having a look on the starting quarter, again, in comparison to the other quarters, they have better ones, but it's mostly in line. And as I pointed out, 2 effects, 2 main effects, the renewable energy, Biomethan portfolio and some cost issues on the other activities, has driven this result in the first quarter. Let's start into the -- and through -- we just, as I said a couple of weeks ago, met at the end of March. So I don't want to be redundant, but just start with a look on the -- in the individual sections. And let's start with the energy one on Page 7. The market development, the market conditions on the -- for the renewable energy business, also due to the COVID-19 situation, are still strong. Demand for investments, long-term investments, renewable energy investments are completely unchanged, one can say. We saw a stronger demand also for the solar trading, in the solar trading business for modules, as it came to a partly shutdown of the Chinese module production, which is back in place already, again. But there was a situation when prices moved up and demand was there, and we were able to supply, able to deliver. So that gave a positive uplift for the solar trade business in the end of March and also throughout April. Be reminded that the COVID-19 situation, really, for the first quarter, had an impact of at least 2 weeks. So the main impact that we will see came through only in April. But it hasn't changed the overall situation on the renewable energy market. All our projects, buildings, the project developments are ongoing as planned. We do not have seen stronger delays. There might be a delay of a week or 2 due to some situations in Spain or a permit that we need to get and this -- which has been delayed a little bit, but it's not overall delay in the project. All the construction areas are working as scheduled. So from that situation, we have a green light on the renewable energy division. What we saw on the Conventional Energy, that was a price decline, a very sharp price decline on the oil sector. You all realized that. And that, of course, had an impact also on our business, mostly on the demand of our customers. And we might struggle about what was the COVID-19 impact, what was the price impact on the oil market, but that has driven strongly demand. We will see when it comes to the number, a very strongly driven demand in the first quarter. And this is continuing. This is ongoing through the month of April. A very strong April will follow. And also for the second quarter, what we see is high demand in our books until the end of June. And this is quite unusual situation, as we have seen mostly in the year that we have a demand -- a stronger demand through the winter months, which comes down after Easter. When normally we say at BayWa, Easter starts business in agri and the Building Materials sector, but it's a bit lower than in the Conventional Energy sector, will start again then after the holiday season, the vacation season later in August. And this is probably partly offset this year maybe by pricing situation or the COVID-19. We believe that in the beginning, we saw some, as you say in Germany, (foreign language) in the beginning of -- also on the oil sector. We don't know if this is really true, but I think also the price situation gave stimulus to the demand and the customers' demand for conventional energy, for heating oil. Lucky enough we were, that we were not anymore that much engaged on the fuel station sector. You remind -- I remind you that we sold the portfolio late in 2019 the TESSOL activities. I think this sector is stronger impacted by reduced mobility activities overall in the country, so this is not longer in our portfolio. And this is also important to reflect if -- when we are looking on the individual numbers, which we are going to do now. Starting with the renewable energy thing on Page 8. You see the main revenue, which is also only related -- mainly only related to the solar trading business. Only 3 smaller portfolios in the Netherlands, with a total volume of 27 megawatts has been sold so far in the first quarter, with only a very low EBIT contribution compared to last year when, additionally, we had this Biomethan thing, this Biomethan sale that I mentioned before. So this is only a very reduced starting into the financial year 2020, brings it to an EBIT of minus EUR 9 million compared to a plus EUR 1.2 million last year. And this is clearly the main impact -- one of the main impacts of the reduced result overall in the group. But once again, as I said, I'm going to give you also the outlook always that we're talking on the current business directly. This is what we will catch up throughout the year, sticking to our plans, sticking to our commitment that we gave to the markets here on the renewable energy sector. When it comes to the Conventional Energy on Page 9, sales down by some 19% -- 18%, 19%, and this is reflecting the TESSOL sale on one hand and the pricing situation on the other hand. It's a price and volume-induced decline in revenues as it's set here, and the overall results are down by 14% from 5.7% to 4.9%. But last year, there were roughly EUR 2 million contributed -- EBIT contribution included from TESSOL from the fuel station activities, which are missing here. And if you reviewed that in last year's numbers, you see that we have a very strong starting quarter here on the traditional, the Conventional Energy business in Q1. And this is driven by the German business, but also by a very good development in Austria. Coming to Agriculture, and just starting with the market development, the market trends that we have seen mostly unchanged to what we reported about in late March. What one can say on the starting season, we are 2 weeks overall behind from a vocational situation due to the very wet February that we saw. Funny enough, everybody is talking about the dryness or was talking about the dryness throughout April. And that has, by the way, changed in between. But just to remind you that the February, in compared to last year's starting season, was very wet. So that kept the farmers from the field. They are now back on it. But as we always see it from time to time, there is a delay in the agriculture process all around of 2 weeks. So the starting situation anyway was pretty good in our areas from the weather conditions that we saw. The April was a bit too dry, but the rain that we saw over the last couple of days, a week ago and throughout the starting of May was very, very important for our farming sector, in particular for the second treatment of fertilizer, which is now being brought to the fields. So I would say everything is in line there. We saw a very good situation also in our -- in Austria and in CEE, so that contributed pretty much into the Q1 result. But once again, please, this is just a flashlight at the end of March. We normally say that the season only starts in March, and we have traditionally 2 cornerstones, 2 milestones to get over. This is the end of May when the spring season is finished on the agri sector. And then by the end of October, when the harvest comes in or the harvest is in, then we can clearly say how the agri season was. But for the time being, everything looks pretty good, looks pretty in line. Looking on the result numbers, and we do it by division to division or subdivision-subdivision. Starting with international trading, the BAST activities on Page 13. Here, you see a sharp decline in sales by some EUR 400 million. This is mainly related to scheduled reductions in activities that we made. We closed our Iran activities. We reported that in our annual analyst conference in March, so the international activities on the Iran business. Also in Hungary, we closed our activities. And of course, we saw a very reduced or complete shutdown, you might say, on the Italian business. You know that we have within the BAST organization 3 main hubs, the main hub, of course, in Rotterdam, with the main part of the business, but also in Spain and Italy, 2 important hubs for the Southern European business. So on top of the reduction with the international Iran activities and the Hungarian activities, there was a shutdown on the Italian business, which accounted for a loss in this result situation of about EUR 1.5 million, which is included in this EUR 3.7 million that we saw. So on these other businesses here, they are running pretty good. The start was pretty encouraging even if it would comes along with reduced volumes due to structural reduction that we made on the business. So to the -- besides the traditional trading activities, we also have the specialty business and they are also running pretty good through the first quarter, and I think this is a very good encouraging solid start for the rest of the year. Looking on the 3 more traditional parts within the agri sector, the Global Produce business, the input and the Agricultural Equipment. I think that one can say that within the Global Produce, this is one of the winner of the situation -- of the current situation. They are benefiting from a higher demand, in particular, on fresh and table fruit. And also from the international side, people are demanding for more fruit products. Apples, for example, we saw a very strong demand on apples from the Lake Constance area throughout the month of March, also ongoing in April. As I said, this is also one thing which is continuing now in the second quarter. In New Zealand, the harvest is almost in now. We saw better harvest than it was in the previous years. The fruit is, size-wise and volume-wise, pretty promising. The harvest is all in. And we also think that the logistics situation, delivering this fruit out from the New Zealand hub into Asia and into Europe is under control. We are prepared, and we were prepared. It's not a problem to have enough containers to ship the products now out of New Zealand. We just had a call yesterday with people in New Zealand. The situation down there is as comparable, you might say, to the German situation, only very few impacts on the overall situation. They are going from level 3 or they're preparing to go to -- from level 3 back to level 2. They almost have no new infections over the last couple of days. So they -- the colleagues down there expect that business is pretty much coming back over the upcoming weeks. Also the international TFC activities have been running pretty good through the first quarter. More important for them is the Easter business or was the Easter business in April, and that will almost impact and are affecting the second quarter result. On the resources business, the market conditions on the resources business, it was a weaker demand on fertilizer overall that has to do with the regulations that we already reported on. And for seasonal delay factors that I mentioned before, the fertilizer prices were low against previous year, but it's almost the -- in line from what we have seen. And the seed business has been pretty strong, so the demand on that kind we put from the input resources. What we saw on the -- and that's surprisingly enough on the Agriculture Equipment, even the economic barometer was on level with the December numbers. The farmers and the willingness of the farmers to invest is pretty high -- was pretty high. And there was also the order backlog, which we went into 2020, was very high. Maybe it has been impacted also by the AGRITECHNICA fair that we saw late last year. But that was funny enough if you think on the current situation. I always say that farmers might be something anti-cyclic when it comes to investment decisions. But the investment the farmers made was always stronger, and this is also still ongoing now in the second quarter. Looking on the numbers, Page 15, starting with the Global Produce. You see the -- what I mentioned, the impact on the result line, very positive after a negative first quarter in 2019. Now already for the first quarter, a small profit and very positive outlook for the rest of the year. We stick to the commitment that we made for the overall result of the Global Produce division. The Agriculture segment, the traditional business, the normal ones in line with last year is on Page 16. An EBIT contribution of some EUR 3 million, already positive in the first quarter, which is pretty good. Slightly higher sales on this sector, but it's mostly price-induced. I think it's -- once again, it only becomes valid after Easter, and by the end of May to see what the spring season or the initial season on the agri sector was worth. But it's a pretty good start here in the first 3 months for the agri segment. And then on Page 17, you see the contribution of the Agricultural Equipment year-on-year. And that's very encouraging also for the rest of the year. I think we will see another strong year on the Agricultural Equipment division. If it comes to Building Materials, also the start here. The situation is unchanged. The -- I would say, the overall demand hasn't changed to what we reported end of March. We are -- we're not affected at all by the COVID-19 situation. All our stores, our wholesale stores have been opened throughout the days. Remind you that in Germany or in Bavaria and Baden-Wurttemberg, we do not run retail stores anymore. They are with Hellwig. But, of course, in Austria, there were a couple of stores as retail activities still with the Tyrolean area, Vorarlberg and Dienten. They have been closed down, but the impact of that was very limited in March. And all our other stores here in Germany has been opened through the whole COVID-19 period. So the demand is unchanged, and I think that will also continue. We have not seen any other risks coming from the payment side from our customers. So this is all in line. It's all pretty good running, as I can say as of today. The overall result situation, a pretty good start into the season. You know that the Building Material business normally starts after Easter, as we always say, and we have a slight improvement of some EUR 4 million overall, including some effects from the Austrian business here already in. So the German business was pretty much stronger compared to the previous year. And as I said, this is very encouraging also for the rest of the year and for the second quarter. Second quarter and third quarter are the main important quarters on the Building Materials sections, and we are pretty confident that we can continue with positive situation that we have seen in the first starting quarter. Yes, the -- just jump to Page 23. It shows the innovation and digitalization. Nothing to report in there. It's running as planned. On the other activities, I think it's worth to have a word on that. You see the EBIT number here from EUR 9 million to EUR 18 million minus, and this is -- we have to be very clear on this. There are 4 main effects on this situation. The most of these effects will be adverse and will be turned again in the second quarter or the rest of the year. The first one that we saw in there that was an effect from valuation of a hedge instrument on the Australian dollar, which is -- there has been accounting -- accounted for, what, minus EUR 3 million. And there will be an adverse effect in the second quarter. So that's just a temporary thing that we have in here by the end of March. What is missing in here and now compared year-on-year, is a EUR 2 million contribution of our activities at equity AUSTRIA JUICE. That has not been in yet in the first quarter. We expect a contribution of some EUR 3 million overall on this AUSTRIA JUICE activities for the full year. So also, this effect will turn again. Last year, we have seen stronger sales of real estate -- from our real estate portfolio contribution of EUR 2 million already in the first quarter, which has not been in now, but which will also come later in the year. So also, this is something that will turn again. And finally, there's last year's accounted for the IFRS 16 effect, which was accounted for under the other activities in the first quarter. And later in the year, it was given to the own division. That was because of systematical reasons, it has been accounted here. That will also turn -- will be turned back in comparison year-on-year in later quarters. So the overall situation for the other activities, what I expect is coming from the EUR 53 million that we had last year saying there were onetime effects from the Emirate project and things in. I, again, stick to the estimation that it should be in a range of EUR 35 million, EUR 40 million overall. And that will also be back from today's perspective by some cost-cutting effects that we will see in the admin sector, as we will have cost reduction as other companies will have due to a lot of COVID-19-related effects. Imagine that we do not have the Oktoberfest this year, so we do not have the ag fair this year. We do not have a general assembly this year. So these are all things that will come with cost reductions in the other activities, so that should support the estimation that something in between EUR 35 million to EUR 40 million will be the full year number, even if it's overstated or seems to be overstated for the first 3 months. Looking on the overall group financials on Page 26, it summarizes what we reported up to EBIT. When it comes to the consolidated net income, you see that we are, more or less, on line with last year's numbers. This is reflected by deferred tax asset that we made up for or were able to made up for, for the first quarter, since the minor situation that we saw will turn in most of these activities and so mainly related to the renewable energy business that will turn later in the year. And therefore, we were able to accrue forward to make a deferred tax asset against it. That brought it up to the consolidated net income in line with last year's number. The earnings per share now reported year-on-year, including the hybrid contribution in as cost in the lower line that we disclosed here. From the group financials on the balance sheet, not a lot of to say. It's more seasonal picture on it. The thing is that we started in the season that goes along with upward on the total assets on mostly on the inventory, mainly also driven from the renewable energy project sector. But that comes not along with a higher debt position. That means we are currently, and this is strongly ongoing through the months of April, May and June, day-by-day, reducing the debt position strongly, by also reducing the commodities that we have in the Agriculture segment, the technical equipment sector and postponing -- slightly postponing effects on the renewable energy sector. This drives the overall picture for the balance sheet by the end of March. Now I think coming to the operational outlook, it's the same thing that we presented in March, and I think this is still very valid. I mentioned it when running through the individual segments. What is the overall expectation on the renewable energy sector? I mentioned it, from today's perspective, we do not have or do not expect higher impacts on the business. All the projects are running from today's perspective. We also expect all the projects being realized in 2020. There might, of course, be postponing effects from 2020 and 2021, but it's not that we are not realizing projects. It might, at least, only be postponing. But from today's perspective, we think it might be able to realize all projects as planned. And what we indicated also from the result line is that the plan that we have is in the range of last year's result. Last year for 2019, the overall result for the renewable energy sector was EUR 100 million EBIT contribution, with a planned EBIT contribution of only EUR 78 million in the beginning of the year. So the plan for this year is to be in line with last year's overall contribution, meaning EUR 100 million again. It could be more or it could be a bit less, I don't know, but around this figure, I think, that it's fair enough to look after. On the Conventional Energy, as I said, a very strong ongoing business now through the second quarter. I think that will also continue throughout the year. We had last year full year EBIT contribution of some EUR 20 million, which includes EUR 10 million EBIT contribution from the TESSOL activities. These are not in any longer, as you might know, but that might give you a flavor what we expect year-on-year if it comes to a normalized result for the Conventional Energy in total. The agriculture outlook, as I mentioned also before, strong in the Agricultural Equipment; strong on the Global Produce; solid, I would say, on the classical, on the traditional Agriculture business here in our areas in the domestic markets. What we expect and what we might see is a slightly lower business, but even above last year's contribution in our international trading activities on the BAST areas through the reduced demand in some parts of the world or the situation that we see in Southern Europe and Italy. But I think it's pretty much too early really to say where the outcome will be on the international activities. From our business review that we held on Monday, we learned that they are pretty much on track to exceed slightly last year's result, which was in the range of EUR 19 million. So this is also my expectation that we will be in that area or maybe slightly above. The main contribution or the main impact out of these areas should be in the traditional business where we only made a contribution last year of EUR 7 million for the whole financial year. I think this is the highest uplift to come back to some more normalized areas in the range of EUR 20 million, EUR 25 million overall. Global Produce, we will see what the harvesting or the marketing of the harvest for the international activities from New Zealand will bring. There will be a very strong demand from Asia and also from Europe, since they can really go sell the fruit into these 2 markets. And so we'll see how they can handle the logistics situation, but at least, also, they will have an uplift year-on-year on this business. Technical equipment overall will be stable. If they can reach at least last year's really good performance, I don't know. But it's all good on getting into this situation. Building Materials. Finally, yes, we do not expect any sharp declines immediately or within the short-term distance. They will have a stable business. This is indicated or forecasted for the rest of the year, and this indicates also by the performance within Q1. It continues to be strong. We have to carefully look on the customer risk in there, if they will reduce demand or we have payment risk in there. We do not see it currently, but I think they will, more or less, be stable, as they have been in the latest years on contribution level of above EUR 30-something million overall. I think that should be it. Just remind you that we are running stable through this difficult situation. Q1 was okay, was good despite the effect that we saw on the renewable energy side and on the other activity side. I think the other business are running pretty good too. And yes, we are pretty confident that we can continue on this track for the rest of the year. Thank you. -------------------------------------------------------------------------------- Josko Radeljic, BayWa Aktiengesellschaft - Head of IR [4] -------------------------------------------------------------------------------- Yes. Thank you very much, Mr. Helber, for presenting the results on the first quarter. Now we are ready to take your questions, please. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We will now take our first question. -------------------------------------------------------------------------------- Knud Hinkel, Pareto Securities, Research Division - Analyst [2] -------------------------------------------------------------------------------- This is Knud Hinkel from Pareto Securities. I've got 2 question. Thanks to your very detailed overview, so I think not many questions left. But still, I would like you to provide maybe an update on the intended restructuring in the Agriculture segment, whether you already made some progress here. That would be my first question. And the second question is on renewables. You mentioned that this is the swing factor for the first quarter. If I strip out the one-off effect, I come up with a delta of still 2-point something in EBIT, which is not a large number. But given that revenues were up, just have problems to understand why EBIT is still down then by that even small number. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [3] -------------------------------------------------------------------------------- Okay. On the restructuring on the agri segment, it's pretty much too early now to comment on this, to be honest, because we are in this process. We included costs of some EUR 2 million in the first quarter already for the closure of, I guess, 7 or 8 locations. But I beg your pardon, I'm not able to talk about this in more detail now, but this is what we have in the first quarter. On the renewable sector, the EUR 2 million. Do you have an explanation on this? The revenue is mainly driven by energy trading and solar trading. So this is the business where we have the lower margins. So that must be the cost effects, overlapping the margin result on solar trade business and the energy trading business. This is all the explanation that I have in short now. It's all -- once again, the whole result on the renewable energy sector is only driven by the realization of the projects. Their costs might not be fully capitalized within the quarters, but this is the only explanation that I have for the results gap in Q1. But this is really a flashback. -------------------------------------------------------------------------------- Knud Hinkel, Pareto Securities, Research Division - Analyst [4] -------------------------------------------------------------------------------- Maybe I can pose a follow-up questions on the Agriculture segment. You said you already provisioned EUR 2 million for one-off costs in Q1. Maybe you can say what's your expectation for the entire year. And for the entire exercise, how much one-off costs do you expect to incur for that? -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [5] -------------------------------------------------------------------------------- That will be a number of EUR 7 million for the full year this year. -------------------------------------------------------------------------------- Knud Hinkel, Pareto Securities, Research Division - Analyst [6] -------------------------------------------------------------------------------- EUR 7 million? Okay. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [7] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- We will now take our next question. -------------------------------------------------------------------------------- Anne Margaret Crow, Edison Investment Research Limited - Industrials and Technology Analyst [9] -------------------------------------------------------------------------------- This is Anne Crow from Edison. I have a couple of questions. The first is, thinking about the building segment, do you have any exposure to commercial property construction? Or is it primarily residential that you're involved in? And then the second one was, would you be able to catch up from the shutdown in Italy? -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [10] -------------------------------------------------------------------------------- Firstly, on the Building Materials sector. Just to remind you that we are not a construction company, so we are not directly involved in any of these construction issues. We are a wholesaler. And our main customers are at least really related to the private home, the housebuilding sector, the private housebuilding sector. There might be the one or the other also commercially customer-related. But the main focus of our Building Materials business is the private homebuilders, the sector of renovation, modernization. And by the way, I would need to point out also on the Building Materials sector, also on the DIY sector in Austria, what we might expect there is positive effects from the homing factor, which is coming back stronger already this year through because people are not able to travel. They are not able to go to or on holidays, so they will stay at home, and that will strongly also impact our business on the Building Materials and the DIY sector in Austria. But coming back to your question, no, mostly of our customer are related to the private housebuilding or the housebuilding sector, not the commercial ones. Catching up in Italy -- yes. Sorry. -------------------------------------------------------------------------------- Anne Margaret Crow, Edison Investment Research Limited - Industrials and Technology Analyst [11] -------------------------------------------------------------------------------- Sorry. But it's really helpful to know that a lot of it is involved in renovation as well because that tends to go on, whatever is happening. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [12] -------------------------------------------------------------------------------- Yes. I can already tell you, all my neighbors through being at home and the home office situation, they all started to renovate their apartments. That's really a funny thing to see. And I encourage them to do so because they have to go to BayWa and buy all the stuff there. Catching up Italy, I think that will be a hard thing to do, to be honest. I think that what has been lost in -- on the international trading, it should be overcompensated by other business in the international BAST activities also on the specialty business. That should not be a big impact. As we saw it with EUR 1.5 million, I mentioned the effect for the first quarter, do not expect then that to be continued quarter-on-quarter, summing it up to some EUR 6 million or so. This is not what I see. But catching it up, that would be probably hard to do. If it comes back to normal, the interesting thing is -- Italy was completely shut down. It was completely unable to get in or out of that country. And this is slowly coming back again. We are already supplying commodities. We are already supplying grains from Germany into Italy again. So this has already continued to be back on track. But to catching it up, I think it will be hard. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- (Operator Instructions) We will now take our next question. -------------------------------------------------------------------------------- Oliver Schwarz, Warburg Research GmbH - Chemical Analyst [14] -------------------------------------------------------------------------------- Oliver Schwarz, Warburg Research. Two concerning the Energy segment. First one is to the traditional energy, which seems to go from strength-to-strength this time due to the decline in the heating oil price, I guess, was a big driver there. But I guess, following a mild winter '19/'20, and people already starting up filling up their tanks, there's only so much space that can be filled from here on. I heard you say that you assume that this strength will continue. On what assumption is that based? I was wondering, especially if we see an ongoing decline in the heating oil price, as it is lagging the development of the crude oil by, give or take, 3 months. That would be my first question. And my second question is to the renewable part of the business. Have you seen any major delays regarding either additions to your pipeline? Or b, delays in the selling process, not in the completion process of projects, but in the selling projects, due to travel restrictions? And this, I guess, is mostly sold off via auctions, which might be hard to entertain, at least, at the current time. That would be my 2 questions. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [15] -------------------------------------------------------------------------------- Thank you, Mr. Schwarz. If I say the demand situation on the conventional energy will be continued and amended for the next 3 months, yes? This is what we -- what I pointed out. The order books are full, and this will continue by the end of -- up to the end of June, which is quite unusual. As I said before, normally, it comes down by the end of April and then start again in August. It will -- yes, this is what I can see. That has been driven by the pricing situation, but which is also sometimes a mild winter. Yes, we have a mild winter, but it was also the situation that people had to heat anyway. So there's not a 0 consumption even if we have a milder winter than it was in previous years. So I think it might come up that we will have in the second part -- second half of the year, a lower demand for some regions or some areas, some volumes. But overall, it continues up to the end of June. This is on the Energy segment, on the conventional one. On the renewable, any delays in additional to the pipeline, we have not seen additionally -- or additions to the pipeline so far. But it was not planned to have new portfolios in or something like that. On the selling process, no, actually, I can't say this. There might be, of course, restrictions due to the home office or the mobile office and the travel restrictions from some to the other project. But we just yesterday sold 2 projects in Malaysia or signed 2 projects in Malaysia. So the process is ongoing on for the big ones that we expect to have in the U.S., mostly in Mexico. These are the 2 main focus areas for the rest of the year. This is continued and it is ongoing. We also locked in a financing transaction on one of the big projects in volume of EUR 100 million throughout the situation. So I cannot really say or confirm that we have stronger delays in the selling process or also in the financing processes. -------------------------------------------------------------------------------- Oliver Schwarz, Warburg Research GmbH - Chemical Analyst [16] -------------------------------------------------------------------------------- Very clear. May I sneak in an additional question? Just a quick one. I just wondered how the sale of PV modules is faring at the moment. -------------------------------------------------------------------------------- Andreas Helber, BayWa Aktiengesellschaft - CFO & Member of the Management Board [17] -------------------------------------------------------------------------------- It was a very strong demand in March and April. That was mainly driven by -- and we were able to deliver. We were able to supply. So that will also have an impact on the April and probably also on the May result. But as we learned on Monday, as China is back in the production and the prices are coming back, this is reduced now. Or the people or the colleagues expect a reduced demand for the rest of Q2, at least. So this is the picture that we saw. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- It appears there are no further questions at this time. I would like to turn the conference back to Josko Radeljic for any additional or closing remarks. -------------------------------------------------------------------------------- Josko Radeljic, BayWa Aktiengesellschaft - Head of IR [19] -------------------------------------------------------------------------------- Yes. Thank you very much, ladies and gentlemen, for your participation and interest in this conference. And also to Mr. Helber for doing it almost alone today. One small remark, our AGM will take place on the 28th of July. It has been postponed due to corona. However, it will also take place virtually. So you can participate if you wish. All information will be broadcasted on our website. And yes, the next analyst conference call takes place on the 6th of August, and we will be happy to hear you and to see you all healthy until then. Thank you very much. Bye-bye. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.