Annual financial statement

Satisfactory business figures for 2018

The prolonged drought had a profound influence on the financial year 2018 for AGRAVIS Raiffeisen AG. However, it still managed to present a satisfactory financial statement for 2018 at the financial statement press conference.

The AGRAVIS financial statement press conference took place at the AGRAVIS Group Headquarters in Münster on 28 March 2019. During the press conference, the company presented its latest business figures and announced its entry into the organic market.

Reports on the financial statement press conference:

AGRAVIS Münster headquarters

The prolonged drought had a profound influence on the financial year 2018 for AGRAVIS Raiffeisen AG. Last summer, some harvest yields were below average while others were catastrophic, depending on the region. AGRAVIS is still feeling the effects of this drought, as CFO Johannes Schulte-Althoff confirmed at the group’s financial statement press conference. “The extreme drought presented agriculture with great challenges and obviously also deeply affected agricultural trade. We anticipate that some 40 million euros will be lost in earnings before tax due to the weather in 2018 and 2019.”

Despite the circumstances, Schulte-Althoff was able to offer a satisfactory appraisal for the previous financial year: “We benefited from our wide-ranging portfolio in the different divisions. This was the only way that allowed us to compensate for the difficult conditions in some business segments and regions. All things considered, including increasingly more intense competition, we are very pleased with a turnover of 6.6 billion euros and earnings before tax of 30.4 million euros,” stressed the CFO. “We’ve defied the weather conditions. AGRAVIS remains on its course for growth despite the drought.”

Key business figures at a glance

Our key business figures underscore the AGRAVIS Group’s performance. Turnover managed to increase by 2.2 per cent while earnings before tax gained 20.2 per cent. At 81 million euros, the operating EBIT also increased again by some 9.4 per cent compared to 2017. “Our employees have done a good job. We made a proactive response to the drought and quickly provided agriculture with solutions, particularly processing operations and dairy farms. This has allowed us to gain market shares and increase our business operations,” affirms Schulte-Althoff. “However, we had to accept a drop in turnover in agricultural trading and plant cultivation due to the drought, but we managed to increase turnover in the other segments.”

The earnings before tax of 30.4 million euros allowed us to propose a dividend of 1.02 euros per share or 4 per cent of the nominal share value at the Annual General Meeting, which took place at AGRAVIS Niedersachsen-Süd GmbH in Wunstorf-Kolenfeld, Lower Saxony on 9 May 2019.

Major investments in strategic core areas

Major investments in AGRAVIS’s strategic core areas over many years have produced a favourable effect on the company’s performance. In the last ten years alone, total investment in items such as new buildings and extensions at locations, warehouse capacity expansion or new business activities, such as the liquid fertiliser plant in Schwedt, amounts to approximately 660 million euros. “At approximately 48.3 million euros, we no longer invested as much in 2018 as in preceding years in response to the massive drops in earnings caused by the drought. However, we’re continuing our course and investing in customer loyalty, attractive jobs and capacity at our locations. The volume of investments stands at 51.3 million euros again for 2019,” emphasises Schulte-Althoff.

Strong player on the agricultural market

“Structural change will continue unabated in agriculture and the agribusiness. The abnormal years 2017 with excessive rain and 2018 with excessively dry weather play a role in this restructuring. The AGRAVIS Group is subject to the cut-throat competition these bad years have caused – increasingly more providers are fighting for the remaining customers. “We are on the right track to success. AGRAVIS wishes to be the strong player on the German agricultural market on a permanent basis and also to continue to expand on an international level in a targeted way. We’re taking the following strategic steps to achieve these goals: Greater customer success, greater customer proximity and greater focus on the sales approach are top priorities for 2019,” stated Dr Dirk Köckler, who joined the AGRAVIS Board of Directors on 1 March 2019 and has served as the Chairman of the Board since 14 March. The company also wishes to increase efficiency through “operational excellence”. “To do so, we require the right employees in the right positions and we need to position ourselves as an attractive employer. We want to stabilise turnover and earnings and evolve through growth in existing business segments as well as through acquisitions and further expansion. Part of our AGRAVIS future also lies in implementing our digitisation strategy and, especially, in working together within the cooperative association.”

Steady growth in turnover expected this year

Dr Köckler and Schulte-Althoff anticipate steady growth in turnover for 2019. “We’ll still notice the effects of the drought in the first six months. We still have a dry spell to get through before the harvest,” state both in unison. Overall, the AGRAVIS Group expects a turnover of 6.5 billion euros with earnings before tax of at least 30 million euros in 2019, provided it is a normal harvest year. “That’s a good, solid result considering the conditions we are already aware of and the continued lost yields as an after-effect of the 2018 drought. We’ll continue to build on these earnings to reach the goals we have set. Ultimately, we’re seeking to attain joint growth within the cooperative association. Profitability in line with the market conditions is imperative for achieving and defending the desired market position and further investing in the development of the core business,” Dr Dirk Köckler clarifies.

Chief Financial Officer Johannes Schulte-Althoff adds: “But to achieve this, we need careful cost management, a clear customer focus and further development of our operational business.” New business units such as organic farming and digitisation will also foster such expansion. “Ultimately, we need a normal year again – not too wet and not too dry.”

Business unit: Plants (Product turnover 2018: 2,782 million euros – 3 per cent down on 2017)

  • Losses in turnover, quantities and earnings on services due to exceptionally hot summer
  • Focus on core functions in the agricultural products segment and the associated drop in export volumes – business stabilised as company broke even

Business unit: Animals (Product turnover 2018: 1,259 million euros – 7 per cent up on 2017)

  • A downward trend in animal numbers is leading to increasing competition in compound feed as production capacities expand
  • Increase in compound feed production after takeover of production locations in Neuss and Wiesbaden
  • Expansion of the special feed and export businesses
  • Livisto Group has increased turnover

Business unit: Machinery (Product turnover 2018: 946 million euros – 6 per cent up on 2017)

  • Expansion of sales activities in the farm machinery business
  • Successful used farm machinery marketing via various sales channels
  • Growth in servicing and workshop business
  • First six months went very well – marked reluctance to invest in agriculture due to drought in the second half of the year

Business unit: Markets (Product turnover 2018: 285 million euros – 11 per cent up on 2017)

  • Ongoing steady growth
  • Trade in construction materials and RWZ Rhein-Main eG Raiffeisen Markets integrated
  • Online business expanded at www.raiffeisenmarkt.de

Business unit: Energy (Product turnover 2018: 1,241 million euros – 5 per cent up on 2017)

  • Greater turnover thanks to increased energy prices
  • Regional business expanded
  • Positive growth in petrol station business
  • Trading expanded with wood pellets

Key business figures at a glance

AGRAVIS shares

AGRAVIS is following a steady course of growth and is a permanent fixture on the German agricultural trade market. It will also continue on this course in the future. This entails expanding the core business, working together with cooperatives and achieving targeted growth on an international level. Equity capital also needs to be increased further. The long-term goal is to achieve an equity ratio of 30 per cent and maintain it on a lasting basis.

The issuing of bonded loan and profit participation rights over recent years has shown that not only the agricultural market but also investors regard AGRAVIS as an attractive, reliable company focused on the long term. “Investor interest has surpassed our expectations,” states Chief Financial Officer Johannes Schulte-Althoff as he looks back.

Proposal: profit participation rights again to generate equity capital

It should therefore be proposed at this year's Annual General Meeting, which takes place on 9 May 2019 in Wunstorf-Kolenfeld/Lower Saxony, to issue profit participation rights to generate equity capital once more. This instrument should provide up to 100 million euros in future years and allow existing participation rights owners to acquire more investment or new profit participation rights. Profit participation rights can be valid for a period of five to ten years. The details, such as the interest rate and type, issue price and division, are currently being established and will probably be available in the autumn. As a result, existing shareholders, interested farmers and banks should be given another opportunity to acquire a direct stake in AGRAVIS or invest money. “The new profit participation rights have allowed us to boost our equity capital and prepare ourselves for future market developments,” stresses Schulte-Althoff.

Strong national cooperative shareholder groups

In the financial year 2018, AGRAVIS Raiffeisen AG’s subscribed capital increased to a nominal 205.5 million euros (previous year: 200.2 million euros). The capital is divided into 8.03 million registered shares (previous year: 7.82 million). The increase in capital is due to the founding of Raiffeisen West AG at the end of the financial year. It is primarily 32 Westphalian cooperatives which have taken a stake in this company alongside banks, associations and agricultural organisations. They pool their interests as shareholders in the holding, meaning that there are now three strong national cooperative shareholder groups – Raiffeisen West AG, VR Holding and RHN Raiffeisen Norddeutschland. This also means the cooperative association is strengthened further for AGRAVIS shareholders. According to the articles of association, at least 60 per cent of AGRAVIS shares must be held by cooperatives or cooperative companies.

This represents an increase of over 130 per cent since 2014.

The calculated value is 25.60 euros per share. However, the market value of the AGRAVIS share is much higher as a result of the positive company development in recent years. It was raised once again in May 2018 – by one euro to 61 euros per share. Since AGRAVIS Raiffeisen AG was founded in October 2004, the original share price has thus risen by 35.40 euros. This represents an increase of over 130 per cent.

In addition to the increasing market value, a sustainable ability to pay dividends is of crucial importance for the value of AGRAVIS shares. Subject to a resolution by the Annual General Meeting, the shareholders will also receive a dividend for the financial year 2018. The Board of Directors and the Supervisory Board proposed a dividend of 1.02 euros per share at the Annual General Meeting. Based on the share book value of 25.60 euros, this corresponds to a dividend yield of 4 per cent (previous year: 3.5 per cent). If the Annual General Assembly accepts the proposed dividend then this would mean a payout to shareholders of around 8 million euros (previous year: 7 million euros).

Uta Löffler
Uta Löffler, Manager of the AGRAVIS Human Resources Department

Megatrends such as globalisation, diversity, customisation and digitisation present companies with new challenges. These global trends also affect the AGRAVIS Group. Together with the Raiffeisen cooperatives, the agricultural trading and services company wishes to be a strong player on the German agricultural market and continue to grow in a targeted way, including on an international level. As a result, greater customer success, greater customer proximity and greater focus on the sales approach are top priorities for 2019. These also require personnel management. Uta Löffler, Manager of the AGRAVIS Human Resources Department, presents its Focus Topics 2019 in the interview.

Ms Löffler, how is AGRAVIS set for the future from a human resources management perspective?
Löffler
: To reach our company’s goals and master global challenges creatively, first of all, we need the right employees in the right place. Our employees are key for our commercial success. It’s essential for AGRAVIS to visibly position itself as an attractive employer to recruit expert young workers, specialists and managers.

To the Careers section

What priorities have you decided for employer appeal and human resource marketing to achieve this in 2019?
Löffler
: We’re centring on three aspects in the competition for talent. The focus is on performance-oriented recruiting. This means that we are primarily using wide-coverage, target-group-oriented channels to recruit employees. These include search engines or social media marketing and intelligent, automated control of job advertisements. Our existing employees are our second important target group. We are constantly working to expand our benefits to offer our employees an attractive overall package. Diversity is the third key word. AGRAVIS stands out as a company due to its openness, diversity and tolerance. This need to be reflected in our teams. Diversity shouldn’t be merely a buzzword – it needs to be coordinated and embedded. In 2019, one measure comprises increasing the proportion of women in management positions as well as female specialists and skilled employees.

AGRAVIS currently has a trainee quota of 9 per cent. How can AGRAVIS successfully appeal to the young generation?
Löffler
: The only way we can achieve appeal is by improving on a continuous basis. And, yes, we want to maintain our high trainee quota. That’s why one of our objectives is to improve the quality of our training programme. In 2019, we’re investing in effective measures to allow our trainers to obtain a personalised qualification in house on a long-term basis. We’re exploiting synergies to achieve this. Communication and exchange of experiences are key success factors throughout the corporate group, including the training department needless to say. That’s why we are systematically encouraging exchange among our trainers, so that they can benefit from best practices throughout the entire corporate group.

Working life and AGRAVIS’s future direction foster creativity, expertise and commitment. How can employees remain motivated and healthy at work?
Löffler
: AGRAVIS’s Company Health and Safety Management has centred on health and employee satisfaction across the group for many years now. We promote awareness of its importance and seek to establish a health manager in each region who serves as a contact person and driving force. As an employer, we assume responsibility for our employees, a responsibility which goes beyond the working day. For several years now, employees have also been able to receive support for personal matters and problems from the pme-Familienservice consultancy service. This programme is being actively expanded with webinars, lectures, seminars and e-coaching.

NetFarming

One issue dominated the headlines for months on end last year: “Drought in Germany”. “Heißzeit” (the warm age) was the 2018 Word of the Year in Germany. Farmer Gunnar Schöndube of Stendal, Saxony-Anhalt was working with site-specific maize sowing supplied by AGRAVIS NetFarming GmbHfor the second time during this extreme weather year. The result: while other farmers experienced great losses in earnings, his harvest remained at virtually a normal level. AGRAVIS NetFarming GmbH maize sowing scheduling allowed him to adapt sowing densities to the different conditions at locations to an optimal extent.

In 2017, Schöndube’s first year with AGRAVIS NetFarming GmbH maize sowing, conditions were excessively wet. It is precisely these extremes which show what the NetFarming module can do for maize cultivation – excellent harvests in good years, assured yield in poor ones. “You can harvest excellent yields in good years. Farmers have comparatively fewer losses in earnings in poor years when others experience major failures,” explains Sebastian Henrichmann, Director of AGRAVIS NetFarming GmbH.

All info from a single source

The sowing density is determined for all yield zones on the field during maize sowing scheduling. The precise planning of sowing density is one of the few points where the farmer himself can make adjustments for maize cultivation. However, he needs to have the right information about soil composition, water availability at the location, climate parameters and characteristics of varieties. AGRAVIS NetFarming GmbH provides such information. “Our module calculates the optimal sowing density for each sub-area. As a rule of thumb, the more water the soil holds, the greater the number of seed grains there are. The selected variety has a further big impact, so it also evaluated with that. During the process, we also draw on knowledge gained from our variety trials over the years,” explains Sebastian Henrichmann. The farmer’s own empirical values are also included in the calculations. The farmer then uses high sowing densities on good sections of a field, so that plants can realise their full plant mass potential, and lower densities on poorer sections.

Top in the region

Schöndube has damp, sand and clay spots in his arable fields in Stendal. Their soil assessment ratings are between 35 and 65. Like many of his fellow professionals, the farmer faced a real challenge in 2018. “I’d obviously already experienced hot, dry summers. But we’d never seen a drought period such as this which lasted from April right through to the winter.”

Thanks to the different sowing densities adapted to different locations, he obtained the best possible maize harvest under such difficult circumstances. “I obtained 380 quintals on average. That was a top rate for this region in 2018.” Dry matter accounted for 32 per cent. In the wet year 2017, it brought Schöndube 640 quintals of fresh mass. “I had a plentiful harvest in 2017 and brought in an almost normal harvest in 2018.” Sebastian Henrichmann adds: “That's an excellent result. Public offices stated that losses of up to 50 per cent were sustained in the maize harvest in Saxony-Anhalt in 2018.”

www.netfarming.de

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