BayWa forges ahead
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”.