BayWa forges ahead

The Orchardist - - >>contents - By Ea­mon Rood

It came just one week after T&G posted an an­nual loss of $18.9m in the wake of its ki­wifruit or­chard in­ter­ests be­ing rav­aged by the vine bac­te­ria Pseu­domonas sy­ringae pv acti­na­diae (Psa).

Fast for­ward to April this year when T&G bought Apollo Ap­ples out­right for $36.05m and BayWa had a se­cure New Zealand beach­head to pen­e­trate the Asian mar­ket. “The ac­qui­si­tion of Apollo fits our strat­egy per­fectly,” said BayWa chief ex­ec­u­tive and chair­man of the Board at T&G, Klaus Josef Lutz, at the time. In­deed, in the year be­tween its New Zealand takeovers BayWa ac­quired two Euro­pean firms com­pa­ra­ble to T&G: Bohn­horst in Ger­many and Ce­fe­tra in the Nether­lands, both of which trade in whole­sale agri­cul­tural prod­ucts as well as pro­vid­ing lo­gis­tics and stor­age ser­vices for farm­ers.

Taken to­gether, pur­chas­ing th­ese four firms lifted BayWa into the top ten of the world's largest agri­cul­tural traders.

BayWa is a fas­ci­nat­ing company. In ad­di­tion to its agri­cul­ture wing, which ac­counts for two-thirds of sales and rev­enues, its sec­ond largest di­vi­sion by rev­enue is in en­ergy – both con­ven­tional and re­new­able – fol­lowed by build­ing ma­te­ri­als. Both of th­ese smaller di­vi­sions are ma­jor play­ers in their own right, the lat­ter be­ing Ger­many's sec­ond big­gest build­ing ma­te­ri­als trader.

As a whole, BayWa em­ploys over 16,800 peo­ple world­wide – about 9,000 in agri­cul­ture, 1,700 in en­ergy, and 4,700 in build­ing ma­te­ri­als. It op­er­ates in 28 coun­tries, mainly across Western and East­ern Europe, but also China, Aus­tralia, Fiji, the United States, Chile, Peru and of course here. Listed on the Ger­man DAX In­dex, BayWa shares trade for around 40 and the company has a mar­ket cap­i­tal­i­sa­tion of over 1.24 bil­lion or NZ$1.9 bil­lion. In the first half of 2014 it recorded rev­enues of 7.7 bil­lion and has turned a profit ev­ery year since its found­ing in Mu­nich in 1923.

What is most in­trigu­ing about BayWa's business model is how it or­gan­ises its dif­fer­ent ‘seg­ments' as it calls its di­vi­sions and how they op­er­ate ge­o­graph­i­cally.It op­er­ates from a core in cen­tral Europe, with all three seg­ments ac­tive in Ger­many, Aus­tria, and Italy, with just one or two seg­ments ac­tive in coun­tries fur­ther from that core. For in­stance, agri­cul­ture and en­ergy op­er­ate in Poland and Bri­tain, while in France and Spain only the en­ergy seg­ment is ac­tive. Its in­vest­ments in South Amer­ica and the Asia-Pa­cific are con­fined to agri­cul­ture.

BayWa sells agri­cul­tural equip­ment in the United States, but the bulk of its ac­tiv­i­ties there are ded­i­cated to re­new­able en­ergy. Re­new­able en­ergy is un­der­go­ing some­thing of a re­nais­sance in the United States, with the cost of wind tur­bines and

In March 2012 the Over­seas In­vest­ment Of­fice ap­proved the takeover of Turn­ers & Grow­ers (T&G) by Ger­many multi­na­tional BayWa Atienge­sellschaft (BayWa), which ac­quired 72.5% of shares for $157m.

so­lar pan­els halv­ing over the past four years. Fed­eral tax in­cen­tives and state gov­ern­ments man­dat­ing util­i­ties to pro­vide a cer­tain per­cent­age of elec­tric­ity from re­new­ables add fuel to a boom­ing mar­ket.

Re­new­ables now ac­count for over half of new elec­tric­ity gen­er­at­ing ca­pac­ity ev­ery year in the United States, sup­ply­ing nearly 15% of the county's elec­tric­ity needs. BayWa is tak­ing full ad­van­tage of this up­take and now has three op­er­a­tional wind farms: two in New Mex­ico each gen­er­at­ing over 19 megawatts of elec­tric­ity, a 30 megawatt wind farm in Texas, another un­der con­struc­tion in Ore­gon, and plans to heav­ily invest in so­lar (in Europe it has al­ready in­stalled 500 megawatts of so­lar ca­pac­ity).

Sus­tain­abil­ity forms a key part of BayWa's cor­po­rate ethos and to this end it has de­signed its business model so its three seg­ments com­ple­ment one another. Its build­ing ma­te­ri­als seg­ment uses low emis­sion ma­te­ri­als and in­stalls so­lar pan­els on ware­houses and barns for farm­ers. In Novem­ber 2013 BayWa rolled out 31 mod­els of its Ef­fi­ciency House Plus un­der a Ger­man fed­eral re­search pro­gramme called “the fu­ture of con­struc­tion”. The homes use sus­tain­able ma­te­ri­als and come with so­lar pan­els in­stalled with lithium bat­ter­ies for stor­age, mak­ing them able to pro­vide 50% of the av­er­age house­hold's elec­tric­ity needs with­out draw­ing from the grid, with ex­cess power avail­able to charge an elec­tric car.

Since 2013 its Euro­pean op­er­a­tions have used almost ex­clu­sively re­new­able en­ergy and em­ploy­ees at its head­quar­ters are pro­vided with elec­tric cars, while in May 2013 it signed up to the Bavar­ian state gov­ern­ment ini­tia­tive for the re­for­esta­tion of moun­tain forests. This year it plans to in­tro­duce a fleet of nat­u­ral gas pow­ered ve­hi­cles and a sup­plier code of con­duct to fur­ther re­duce emis­sions through­out its sup­ply chains. BayWa's strat­egy is pay­ing off. At its an­nual meet­ing in June, share­hold­ers voted to in­crease div­i­dends by 0.10 to 0.75 per share, where chief ex­ec­u­tive Lutz noted that with its ac­qui­si­tion of T&G, Ce­fe­tra, and Bohn­horst, in­ter­na­tional hold­ings now con­trib­ute over 50% of its rev­enues. “BayWa's in­ter­na­tional ex­pan­sion has made it more weath­er­proof in the truest sense of the word” Lutz told share­hold­ers, “in the up­com­ing years, we aim to con­tinue ex­pand­ing and ce­ment­ing our po­si­tion in the rel­e­vant mar­kets, es­pe­cially in­ter­na­tion­ally”.

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